Sometimes debt could be a helpful tool – InsuranceNewsNet

InsuranceNewsNet — Your Industry. One Source.™

Sign in
  • Subscribe
  • About
  • Advertise
  • Contact
Home Now reading Newswires
Topics
    • Life Insurance News
    • Annuity News
    • Health/Employee Benefits
    • Property and Casualty
    • Advisor News
    • Washington Wire
    • Regulation News
    • Sponsored Articles
    • Monthly Focus
  • INN Exclusives
  • NewsWires
  • Magazine
  • Webinars
  • Free Newsletters
Sign in or register to be an INNsider.
  • Exclusives
  • NewsWires
  • Magazine
  • Webinars
  • Free Newsletters
  • Insider Pro
  • About
  • Advertise
  • Editorial Staff
  • Contact
  • Newsletters

Get Social

  • Facebook
  • Twitter
  • LinkedIn
Advisor News
Newswires RSS Get our newsletter
Order Prints
August 17, 2022 Newswires No comments
Share
Share
Tweet
Email

Sometimes debt could be a helpful tool

Denver Post, The

In some corners of the personal finance advice world, getting into debt is just about the worst thing you can do. And yes, some forms of debt -- particularly those that charge high interest rates -- can keep you locked in a cycle of owing money for years.

Still, there are times where taking on debt serves a purpose in your overall financial picture. Here are a few examples:.

For something that may go up in value

Related stories

  • Fed slows rate hikes even as Powell says there's more work to do
  • Mortgage rates in U.S. fall again, hit 6.09%

Debt is often categorized as good or bad, depending on the reason you borrow money and how much you'll pay in interest.

"Good debt can help you move forward with your career and life," says Mark Reyes, a certified financial planner and senior manager of financial assistance at financial services app Albert. "On the other hand, bad debt can hold you back from reaching your goals."

Mortgages are commonly cited as an example of good debt, since a home can appreciate in value. "That's not a bad debt to have; it's going to put a roof over your head," says Bill Hampton, a certified financial education instructor and CEO of Hampton Tax and Financial Services in Atlanta. Of course, borrowing more than you can afford or not understanding the terms of the loan can cause financial risk.

Student loans are another generally agreed-upon example of good debt, since your education can boost your lifetime earning potential. According to Hampton, "You're going to be in debt for a number of years, but it'll get you a higher-paying job."

To fund a major purchase

Now for the bad debt: credit cards. Not only do they charge high interest rates, but you can keep putting purchases on them even if you still owe money from prior months. It's easy to end with a balance that keeps growing, no matter how much you try to chip away at it.

However, some credit cards offer no-interest promotions you can use for a large purchase. These promotions allow you to spread out a cost over many months, often 12 months or longer. Make sure your budget allows you to pay it off in the promotional time frame, though -- before interest kicks in.

If you have existing debt, balance transfer cards allow you to move that debt over and pay no interest for months. But as always, make sure you understand the terms of the card you use -- you'll likely pay a fee to transfer, and the interest rate will climb back up once the promotion ends.

Once you own a home, borrowing against its value in the form of a home equity loan or home equity line of credit -- or HELOC -- can free up cash for home renovations. Homeowners can opt to do this instead of putting renovation costs on a credit card charging a higher interest rate.

To weather unexpected costs

You've heard the lecture before. You need to have emergency savings. But that's the thing about emergencies -- they happen at random, and sometimes simultaneously, whether you've been able to save up spare cash or not.

These are the moments when you may have to make the best less-optimal decision, and that can mean taking on debt. HELOCs and personal loans may be a lower-interest way to borrow money to cover an emergency situation, but credit cards can also serve as a backup source of emergency funding.

If an emergency expense lands you in credit card debt, Hampton recommends making a plan to pay that balance off over a few paychecks. You can also take other actions to lower the cost of your debt, like moving the debt to a balance transfer card or seeing if your credit card company will meet you halfway.

Older

America’s Essential Hospitals praise new law, urge more funding

Newer

Advisor News

  • Fed slows rate hikes even as Powell says there's more work to do
  • Mortgage rates in U.S. fall again, hit 6.09%
  • 1 in 3 Americans struggling financially but goal-setting is a game-changer
  • Advisors bet on US stocks to outperform in 2023 amid tech rebound
  • Investors want more ESG information from companies
More Advisor News

Annuity News

  • Study: Does pessimism really suppress annuity sales?
  • Sweet streams of income: ChatGPT, the bard of annuities
  • F&G Annuities & Life announces equity investment in life IMO SYNCIS
  • Investors scrambling to lock in rates propel annuity sales to record highs
  • North American and Annexus launch new fixed index annuity
Sponsor
More Annuity News

Health/Employee Benefits News

  • State: all insurers failed to comply with Oregon Reproductive Health Equity Act
  • Will plan fix California health care?
  • Insurance giant Elevance to move into 15th state
  • Medicare card scam targets seniors for personal info
  • Yes, states are re-checking Medicaid and CHIP eligibility starting in April
More Health/Employee Benefits News

Life Insurance News

  • Chris Wilson tells court former friend Murdaugh confessed he was ‘stealing money’
  • State's motive testimony could prolong Alex Murdaugh murder trial
  • Equitable expands portfolio in VUL market
  • New date set for billionaire suspect accused of bribing state cabinet member
  • House approves bill protecting life insurance payouts from bankruptcy
More Life Insurance News

- Presented By -

Top Read Stories

  • Chicago news roundup: PPP fraud uncovered in Chicago, informant reveals $100K bounty on FBG Duck and more
  • Gov. Carney: Enrollment on Delaware's Health Insurance Marketplace for 2023 Reaches All-Time High
  • 25 people charged in fake nursing diploma operation
  • Missouri Department of Insurance: Over $24 Million Returned To Missouri Insurance Consumers In 2022
  • Connecticut addressing broker shortage amid The Great Unwinding
More Top Read Stories >

FEATURED OFFERS

Meet Encova Life
We know agents matter. You can count on our life team to be high tech, high touch and responsive.

How to Write For InsuranceNewsNet

Find out how you can submit content for publishing on our website.
View Guidelines

Topics

  • Life Insurance News
  • Annuity News
  • Health/Employee Benefits
  • Property and Casualty
  • Advisor News
  • Washington Wire
  • Regulation News
  • Sponsored Articles
  • Monthly Focus

Top Sections

  • Life Insurance News
  • Annuity News
  • Health/Employee Benefits News
  • Property and Casualty News
  • AdvisorNews
  • Washington Wire
  • Insurance Webinars

Our Company

  • About
  • Editorial Staff
  • Magazine
  • Write for INN
  • Advertise
  • Contact

Sign up for our FREE e-Newsletter!

Get breaking news, exclusive stories, and money- making insights straight into your inbox.

select Newsletter Options
Facebook Linkedin Twitter
© 2023 InsuranceNewsNet.com, Inc. All rights reserved.
  • Terms & Conditions
  • Privacy Policy
  • AdvisorNews

Sign in with your Insider Pro Account

Not registered? Become an Insider Pro.