Are all debts bad?

Share This Article

• Facebook
• Twitter
• Digg it
• Print

Believe it or not, there are times when getting into debt can be beneficial for your finances.

Personal debt in the UK stood at £1,460 billion at the end of March according to debt education charity Credit Action. As a nation, we’re constantly dumping extravagant purchases on credit cards and dipping into our overdrafts.

However, debt isn’t always a dirty word. How else would most of us get on the property ladder if we didn’t go into hock?

Here are five times when borrowing might not be such a bad thing.

Build up a credit history

If you have never borrowed money, you may find it difficult to secure credit when you need to. This is because you represent an unknown risk to potential lenders who prefer customers with a history of responsible borrowing. It’s a real catch 22.

Taking out a credit building card could demonstrate your desirability as a customer. Keeping up with your repayments and staying within your agreed limit will prove to other banks and credit card companies that you have sensible financial habits.

Beware credit building cards may not offer the most favourable rates on the market.

Planning for the future

Taking out a student loan could be a shrewd way to become more employable in the future. Although this means taking on debt before you begin your career, you could boost your earning power later in life.

There has been widespread scepticism about the value of university education in recent years. However, a government review found that a degree adds £100,000 to the average graduate’s lifetime earnings.

Add value to your property

Any debt that will eventually improve your bank balance is probably a sound investment. For example, homeowners who build an extension or install a new kitchen are likely to increase the value of their property.

If you’re canny about home improvements, you could easily recoup the cost any loans you have taken out and make a tidy profit when it’s time to sell.

Bear in mind that certain renovations and alterations may not increase the value of your property at all. If you are thinking of selling your home, try to avoid highly personalised decorative touches. Although you love lime green walls, your prospective buyer could feel differently.

Take on extra debt?

If you’re already in debt, borrowing more money might seem like financial suicide. However, taking out a personal loan with a favourable APR could be an exception to the rule.

By using the loan to pay off other more expensive debts, you could slash the amount of interest you pay. Once you have consolidated your debts, your finances may seem less cluttered and easier to manage.

Preparing for the unexpected…

No matter how cautious you are, there’s no escaping from unplanned expenses. Cars break down and laptops need to be replaced…

If you’re forced to pay out for something you haven’t budgeted for, you could consider a credit card with 0% purchasing power. As part of an introductory offer, these cards waive the interest on new purchases.

Remember, you will need to clear your balance before the introductory offer expires or you could be hit by expensive interest.

Articles featured on BeatThatQuote.com are for information purposes only and reflect the views of individual writers. Articles are not, and should not be considered as, financial advice. BeatThatQuote.com strongly encourages our readers not to rely solely on information contained within our website, but to conduct their own research and seek independent advice about the financial products they purchase.**



**This material is for information purposes only and should not be considered financial advice. We strongly encourage our readers not to rely solely on this content, but to seek independent advice when making financial decisions.**

Tags for this article