I have seldom come across people with a neutral outlook toward a loan. Either they are in for or against availing a loan for whatever reason. But the truth is a loan is neither good nor bad. It becomes a good or bad experience depending on the purpose of the loan and the person taking the loan.
The good loan and the bad loan
So, the question arises, what are good loans? Loans that are availed to be used as leverage to create more money are considered good loans. A business loan or a loan to buy an appreciable property can be considered a good loan. Being a good loan is not enough and depends on the maturity and understanding of the person availing the loan to be fruitful in reality.
A loan that does not make money for you is a bad loan. Obviously, such a loan eats up your future income at the current date. A personal loan availed to buy luxuries, or for going for a vacation can be categorized as a bad loan.
Points to consider while availing of a loan
- Loans taken to buy luxuries can create problems. It is always advisable to earn interest and buy luxuries than to buy luxuries and pay interest.
- Cover all your loans and liabilities with proper insurance to protect your family from financial burdens in case of any unpleasant incident.
- Gain knowledge about effective ways to pay off the loan and apply it.