Unless you have been in a lot of debt, particularly uncontrolled debt, it can be difficult to imagine what it might be like to have a lot of bad debt. If you speak to anyone who has been in a lot of debt they will explain how nasty it can be and how you should be really careful to avoid it.
There are different types of debt and it is bad debt that you need to avoid if you can. Good debt is something which will help you to progress in your career, such as a student loan or a car loan so you can drive to a job or will help you advance financially such as a mortgage. A bad debt is where you use the money for something that you do not need, such as luxury items.
Avoiding bad debt can be difficult these days. We are constantly bombarded with advertisements telling us that we need certain things and our lives will be improved by them. We are given the opportunity to borrow money using lots of different means such as credit cards, store cards, overdrafts, personal loans and payday loans. This means that it is extremely easy to borrow money and is seem as acceptable as well. However, many people forget to consider the cost of the borrowing and it is so easy to borrow a lot of money, that you can easily get into financial trouble.
One way to avoid bad debt is to make sure that you do not have any means of borrowing. This means that you have no credit card or store cards, not overdraft and apply for no loans. If there is no extra money available then you will not be able to spend more than you have. There are people that do this and are quite happy doing so. However, there is a security that can be had by knowing that you have money available to you if you need it in an emergency, that you can easily buy things online and you have the means to pay for things even if you have no cash. If you think that you cannot trust yourself to have self-control when you have easily available debt then make sure that you do not have any. It can be difficult cutting yourself off like this, but if it is the only way to protect yourself form debt, then it can be a really good idea.
It is worth thinking hard about everything that you purchase and whether you really need it. It is best to make sure that you buy all of your essentials and then make sure that you calculate how much money you have left before you buy luxury items. As it is not wise to borrow money for luxury items as you end up paying a lot more for them and you do not need them, you should budget carefully for them. If you do not have enough money left to pay for the thing that you want, then save up for it. Put some money aside each month until you have got enough to be able to buy the item that you want. It can be very satisfying buying something when you have spent a long time saving up for it.
If you do decide to go ahead and borrow some money take some time to consider the cost of it first. Think about where to borrow the money from so that it is not too expensive. Consider different types of borrowing as well as between lenders to work out which will be the cheapest. Calculate what the repayments will be and think about whether you will be able to afford them. Also think about whether you will be able to afford them should the interest rate rise and the amount you have to repay go up. It is also wise to think about whether you understand the terms and conditions, the risks associated with borrowing money and the costs. If you are making a calculated decision, then you can be happy that the debt is unlikely to get out of control and be something that is bad for you.
So a bad debt is one that will not help you to better yourself perhaps educationally, career wise or financially. It can also be considered to be any debt that gets out of control. So to avoid it you need to make sure that you plan your borrowing really well and make sure that you know exactly what you are signing up to and that you will be able to cope with it. Be confident that you will be able to make the repayments, even if they get more expensive and be sure that what you are buying really is worth the expense of the debt.