Publish Date: 20/08/2018
Remember that when it comes to applying for a loan, say for a home or a new car, having no credit record could actually count against you. Debt-free living may seem like the financially responsible approach, however with proper debt management, good debt could actually help improve your life, create wealth and improve your credit score.
Remember that when it comes to applying for a personal loan, a home loan or vehicle finance, having no credit record could actually count against you. This is where the concept of good debt vs bad debt comes into play.
Good debt helps you grow
So, what is good debt? Good debt is an investment in your financial future. It helps to create a firm foundation and possibly improves your future earning potential. If you’re about to take out a loan or go into debt, ask yourself these questions first:
Some examples of good debt are home loans, student loans and business loans. However, there are no guarantees and you should always be cautious when going into debt, especially in South Africa’s current economic climate. For example, paying off your student loan might be difficult if you’re unable to secure full-time employment.
Bad debt weighs you down
Bad debt is often associated with impulse purchases. Buying day-to-day items such as foods and disposable product, or paying everyday bills, can very quickly lead to bad debt. Some examples of bad debt are:
Too much debt, whether it’s “good” or “bad”, can quickly add up. If not managed properly, even good debt can become bad debt and may even lead to forced debt counselling. Below are a few grey areas:
Learn how to manage your credit card better with the tips in this blog post: How to use your credit card wisely
About African Bank
Our mission is to be a successful Retail Bank offering a wide range of products and services to the consumers of South Africa. The people who work for African Bank represent the diverse population of South Africa; therefore we are a reflection of you, of all South Africans. We seek to provide value - more than our consumers expect of us. We promise to live our purpose 'humanity through banking' in all that we do and we are confident that we can, because 'We are You'.