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Debt: Good and Bad.

Debt is simply something that it owed to someone else. Here we talk about debt in the financial sense; money that is owed. If you owe that money to someone or the bank for instance, you are the one in debt - the debtor. If the money is owed to you for work you have carried out or money that you have loaned, then you are the creditor.

Debt can actually be a good or useful thing and most people go into debt for the purchase of a car; house, when it is called a mortgage; house modifications by way of loan from a finance company or bank; or a bank loan to buy all manner of things. Basically, the country and its businesses function well because of debt.

 Very few people are able to buy their house with a cash payment, or a new car for that matter. In any event, the price of a house would normally have risen by the time you saved up for it over many years.

Good Debt

All of that debt starts life as good manageable debt that you and your lender bave agreed you can repay by way of regular monthly payments. If all goes to plan, you will keep up your payments and eventually pay off that debt. The likelihood is that you will also have started some new debt for the purchase of something else.

 All of this debt, helps you to live a life comparable to the Joneses, and provides your lender with a steady stream of profitable income. It also helps businesses to sell items which would otherwise be out of range if the cash price had to be paid up front.

This good manageable debt, probably help you in your normal life, in that you will probably be working in a company that functions because of debt, you will buy goods which are manufactured and sold with the help of debt and travel to work or on holiday with a transport that has been funded by debt.

Bad Debt

The other side of debt is when the payments cannot be kept up for whatever reason, or you simply cannot pay the electricity or other utilities bill that is due next week. So a ‘bad debt’ in pure financial terms is one that is at risk of being paid back. In extreme but not uncommon cases, it is a debt that cannot be paid back without some form of intervention – either by the creditor, or by some third party agency after seeking help by the debtor.

It may also result in you being taken to county court, and in extreme cases, a bailiff instructed to collect money you owe or having a Debt Collector calling with a view of obtaining payment of your debt.

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