Debt is an important tool which helps you finance large purchases, open a business or even help build your credit score. It is a topic on which different people have different opinions; some find it acceptable till the time you have enough resources to pay it back while some think it is not necessary and that it would become a big liability on your finances.
But we have to remember that debts do help you finance big purchases when you don’t have enough cash flow and it also forms a big part in shaping up your CIBIL score, we just need to know where to draw the line. But when debt become too much? Till How much debt is beneficial for your credit health?
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There are guidelines by the lenders on how much debt you should have. Your debt shouldn't exceed a certain percentage of your income. You should have enough income to cover off your debts as well your interests.
When you start missing out on payments, work overtime to pay off your debts, use up your savings- that’s the time when you have crossed the ‘beneficial debt’ line. The debt is no longer beneficial to you and it would start harming your credit score now. Till the time you use it responsibly, debt is a great credit tool but if not it becomes a big dent in your finances.
Before taking additional debt, keep these points in mind.
• The most important one- you should have enough income and savings to cover your payments for the debts( including interest)
• Always go into debt when you are confident you receive a ROI (return on investment). If you don’t get good returns, there's no point in going for the debt. Research well on the debt’s ROI value before you go for borrowing.
• Check if you are qualifying for a good interest rate. Calculate the overall charges in the long run. For e.g. - if getting a house at a low interest rate would be better than renting. If you are not getting a good competitive rate, then take a little time look at your options or if you have a bad credit score, rebuild it and then go apply again.
If you'll follow above mentioned measures, then the debt you are going for is not too much, but if you can’t then that debt is obviously gonna too much.
Repair and enhance your credit score by just selecting suitable package available at www.cibilconsultants.com
Source: Secondary
But we have to remember that debts do help you finance big purchases when you don’t have enough cash flow and it also forms a big part in shaping up your CIBIL score, we just need to know where to draw the line. But when debt become too much? Till How much debt is beneficial for your credit health?
There are guidelines by the lenders on how much debt you should have. Your debt shouldn't exceed a certain percentage of your income. You should have enough income to cover off your debts as well your interests.
When you start missing out on payments, work overtime to pay off your debts, use up your savings- that’s the time when you have crossed the ‘beneficial debt’ line. The debt is no longer beneficial to you and it would start harming your credit score now. Till the time you use it responsibly, debt is a great credit tool but if not it becomes a big dent in your finances.
Before taking additional debt, keep these points in mind.
• The most important one- you should have enough income and savings to cover your payments for the debts( including interest)
• Always go into debt when you are confident you receive a ROI (return on investment). If you don’t get good returns, there's no point in going for the debt. Research well on the debt’s ROI value before you go for borrowing.
• Check if you are qualifying for a good interest rate. Calculate the overall charges in the long run. For e.g. - if getting a house at a low interest rate would be better than renting. If you are not getting a good competitive rate, then take a little time look at your options or if you have a bad credit score, rebuild it and then go apply again.
If you'll follow above mentioned measures, then the debt you are going for is not too much, but if you can’t then that debt is obviously gonna too much.
Repair and enhance your credit score by just selecting suitable package available at www.cibilconsultants.com
Source: Secondary
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