The Good, the Bad and the Ugly About Personal Debt


If you have personal debt, and the chances are very good that you do, then you are probably familiar with the good, the bad and the ugly that comes along with having financial obligations. When you are able to control your debt, then you will find that carrying debt is a good thing. But if it spirals out of control, then that is when the trouble begins.

In order to benefit from the presence of personal debt, you need to become acquainted with the different degrees of debt that exist. When you are working with your own financial obligations, you need to determine what category they fall into. If you are not working with the good aspects of personal debt, then you should make it your mission to get your debt into that category.

- The Good

How can personal debt be good? When you maintain a balance on your credit cards and make your minimum payments every month, then you will see your credit score go up. The good part about managing debt is getting a high enough credit score that allows you to get the financing you want for the things you need.

If you maintain a balance of around 20 percent on all your one credit card, pay all of your bills on time, avoid having multiple credit cards and pay your bills on time, then you will have a credit score that is high enough to get you the mortgage or car loan you need. It is when you pile up the credit cards and maximize your limits that the bad and the ugly start coming into play.

- The Bad

Escalating debt is bad. When your personal debt starts to overtake your income, then you start finding yourself in really bad financial situations. For example, if you use your credit cards every month to buy food and gas because paying your credit card monthly minimum payments leaves you no extra cash, then you are financing those temporary expenses for several years.

When debt starts to get bad, it starts to become something you rely on to survive. Your extra cash goes to credit card and personal loan payments and leaves you no extra cash to pay for your monthly expenses. Even when debt gets bad, it is still not out of control. If you talk to a debt expert, you can explore options such as consolidation and debt settlement.

The key to bad debt is using it as a warning sign to get something done about your situation. Spending money and building up credit can be a lot of fun until the bill comes due. As long as that spiraling credit gives you the motivation you need to address the issue, then it can avoid becoming ugly credit.

- The Ugly

Ugly personal debt is the kind of personal debt that gets ignored and turns into a monster. It is kind of like leaving a loaf of bread out in the sun and then watching it go bad. This is the kind of debt that will push you towards extreme solutions such as bankruptcy.

If you take care of the situation when your debt is bad, then you can avoid the ugly phase. But if you allow your debt to get ugly, then you should hire a financial professional to help you take care of the situation.

Personal debt can either be good, bad or ugly. The more that you monitor and work with your debt, the more that you can keep it good and prevent it from going bad. If it ever gets ugly, then you have a problem you will not be able to solve on your own.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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