When we are thinking about borrowing, it is always wise to have a good debate with ourselves as to whether we think it is a good idea. This is because we need to be sure that we really are taking this risk and paying out this money for something that will really benefit us. Loans can be good or bad and we need to decide whether the loan that we are thinking of getting will be good for us.
Good vs bad debt
It is not always that easy to decide whether the loan we want to take out will be good or bad debt. This is partly because there are different definitions of good and bad debt and partly because sometimes there are unknowns which will have to address.
For some people good debt is something that will benefit us financially and bad debt is something that will not. So, if we take out a mortgage and buy a house, that will benefit us because we will no longer have to pay rent and our money will be going into something that we can later sell and get back. Bad debt would be using a loan to buy a pretty cushion made from gold which we never look at or use. However, if we need to drive for a job, but cannot afford the lessons, should we borrow money to do a crash course before the interview so that we can say we can drive and hope to get the job? This is a big gamble and not easy to assess.
Others would say that a good loan was one that you could easily repay. One that you had carefully researched so that you were sure that you could afford and that you have compared and know that it will give you the best value for money. Again, this might seem straightforward but if your situation changes during the course of the loan you could feel that it was not the right choice after all.
Are bad credit loans good or bad?
As it is tricky to define good and bad debt and sometimes tricky to apply it then labelling a loan with either good or bad is not possible. Therefore, we cannot say for sure either way. However, you can do some things in your specific situation to see whether they will be good or bad for you.
Firstly, you need to think about what you are buying with the money from the loan and whether you feel that it is necessary. Think about whether you can go without the item or wait until you have saved up the money for it.
Calculate how much the loan will cost you and you will be able to work out whether you think that it will be worth paying that much money for it. You should also compare the loan to other types of loan and see whether you think they might give you better value instead. You need to think about the cost of the loan but also about how it works and whether you feel that it will suit you. One thing to be attentive to is the repayments. Make sure that you will be able to afford to repay the loan. If you miss a repayment you will get charged extra fees and this is not good. Therefore, you should be comparing the loans and looking at the repayments so that you can take on a loan which will suit you and allow you to make the repayments of an amount that suits you.
If you do decide that a bad credit loan will work for you then you need to compare the different lenders. You need to think about what you are looking for in a good lender and whether you feel that the lenders you have looked at can provide that. It is not always easy to know but you want to make sure that you get the best value for money. So, you will not want to pay more than necessary for the loan but you also want to make sure that you are not paying so little that the service you receive is not satisfactory. Of course, it is never as simple as this as the dearest loan will not necessarily be the one you think is the best. Think about what you would like to see in a good lender and then match them up to that.
It is not always easy to make decisions like this on our own. It can be worth asking someone else to help us. If you discuss things with them and do the research together you could end up coming up with a better solution. As well as their knowledge helping you, they may also look at things form a different point of view to you and that could be helpful.