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Good Debt and Bad Debt

eugene · 24 · 4478

eugene

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on: Feb 01, 2012, 02:32 PM
hi guys  :hihi:

halimbawa nga ng good at bad debt and please do expound why it is bad or good.

 :thankyou:


ferrariEverest

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Reply #1 on: Feb 01, 2012, 02:38 PM
good debt
-umutang ka para ipangcapital or pandagdag capital sa business mo
-paggamit ng credit card in your purchases... purchases which u intend to pay in full on or before the due date

bad debt
- umutang ka para ipangcasino or ipangsugal
- paggamit ng credit card in your purchases... purchases na walang kwenta/gadgets na dmo kailangan, or yung mga 'doodads' :D.... tapos babayaran mo in installments for a few months/years


BFXGeneralConsultant

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Reply #2 on: Feb 01, 2012, 02:55 PM
GOOD DEBT: desididong magbayad sa takdang panahon or earlier
BAD DEBT: walang planong magbayad at gusto pa yata mamundok.. hehehe

Respectfully yours,
BFXGeneralConsultant


melman

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Reply #3 on: Feb 01, 2012, 04:15 PM
good debt:
- if it is non-interest bearing, you can make the money you should have payed work for you while you slowly pay for the debt. ex. making big purchase on some credit card payment scheme like 2 years to pay at 0 interest
- if you put the money to something that is earning above the interest expense you will be paying

bad debt:
- buying something that would depreciate a lot in value then not paying the debt on time making it acrue more interest payments.
-


eugene

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Reply #4 on: Feb 01, 2012, 05:31 PM
good debt
-umutang ka para ipangcapital or pandagdag capital sa business mo
-paggamit ng credit card in your purchases... purchases which u intend to pay in full on or before the due date

bad debt
- umutang ka para ipangcasino or ipangsugal
- paggamit ng credit card in your purchases... purchases na walang kwenta/gadgets na dmo kailangan, or yung mga 'doodads' :D.... tapos babayaran mo in installments for a few months/years

I see, I thought credit cards are classified as bad debt. so it depends pala.

Post Merge: Feb 01, 2012, 05:34 PM
GOOD DEBT: desididong magbayad sa takdang panahon or earlier
BAD DEBT: walang planong magbayad at gusto pa yata mamundok.. hehehe

Respectfully yours,
BFXGeneralConsultant

 :D medyo nalilito ako dun. example nga BFXGeneralConsultant based dun sa definition mo above sa Good and Bad Debt.
 :thankyou:

Post Merge: Feb 01, 2012, 05:36 PM
Please provide more practical/common examples in life ....  :hihi:
« Last Edit: Feb 01, 2012, 05:36 PM by eugene »


bauer

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Reply #5 on: Feb 01, 2012, 05:57 PM
Good debt = no interest on principal (it's better if it is pay when able)

Bad debt = you take out a loan or borrow money for

1. business operation (salaries, raw materials, utilities, overhead expenses, etc.)
2. business expansion (add branches, add equipment, add manpower)
3. finance of lifestyle (vacation, purchase clothing, jewelries, dine-out, etc.)
4. finance properties (cars, houses, condos, yachts, lands, etc.)
5. finance charity works (dole outs & loans to family, friends, etc.)
6. finance extra curricular activities (sugal, drugs, sports/club memberships, etc.)
7. finance family needs (tuition, hospital, funeral, daily subsistence, etc.)


Bp22estafa

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Reply #6 on: Feb 01, 2012, 06:05 PM
credit card + no discipline + buying wants you can't afford equates to bad debt

credit cards actually saves you time especially if you don't have enough money to buy something tapos haba ng pila sa mga atms. if you can always pay in time. only advantages awaits you. good debt!

I see, I thought credit cards are classified as bad debt. so it depends pala.

Post Merge: Feb 01, 2012, 05:34 PM
:D medyo nalilito ako dun. example nga BFXGeneralConsultant based dun sa definition mo above sa Good and Bad Debt.
 :thankyou:

Post Merge: Feb 01, 2012, 05:36 PM
Please provide more practical/common examples in life ....  :hihi:


Archcavalier

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Reply #7 on: Feb 01, 2012, 06:33 PM
Technically, all debt are bad since it leaves your wallet it considered a liability.
In accounting debts are liability.
Personally I wont say theirs a good debt and a bad debt as i consider debt whichever form it may take as a liability.

Wise debt is another thing.

Scenario 1: Margin Trading
You borrow money from the brokerage to trade with.
You get to preserve your capital and still trade in the market using the brokerages own money and profit from using their money.
Downside is when you lose, then you end up with a liability.

Scenario 2: Business Capital
You get to start a business using somebody else's money.
Downside, if business goes down you lose your own money and more due to interest.

Scenario 3: Enhancement
You have the capital for your business, you borrow money to enhance your business not to refinance.
Lets say i spend 40% of the capital for my business start up(government registrations and office stuff), the remaining 60% you get to play with. You borrow equal to 60% of your capital, you use borrowed money to play in the left side of the court while you use your own money to play in the right side of the court. Meaning your hitting 2 targets at the same time. If 1 end up dead you get to use the other 1 to subsidized and have the possibility for a rescue.
Downside is when the 2 targets ends up dead you end up with more liability.

Scenario 4: FE's Good Debt / Bad Debt (My Favorite)  :D
Do all the bad debt FerrariEvarest said.
Upside, Im the guy lending you money and I have your other stuff as collateral.
Whether you go up/down I profit.
If you go up I profit more, if you go down well you lose more stuff and if i play my cards right i get my capital plus profit.  :harhar: :harhar: :harhar:


rds

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Reply #8 on: Feb 01, 2012, 06:45 PM
GOOD DEBT: desididong magbayad sa takdang panahon or earlier
BAD DEBT: walang planong magbayad at gusto pa yata mamundok.. hehehe

Respectfully yours,
BFXGeneralConsultant

bakit sir, may pina-utang ka ba na hindi na nagbabayad ad mamumundok na lang para makaiwas...parang indiana jones daw! may treasure hunt pa!


Bp22estafa

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Reply #9 on: Feb 01, 2012, 08:56 PM
@eugene

basically if you can live without acquiring debt the better, stay away from debts or liabilities as much as possible.

but sometimes certain opportunities might present itself which requires you to borrow, take out a loan or acquire debt. like business opportunities, a property that's selling below it's fair market value or even any products you think you can sell effectively & efficiently to make a profit. when those opportunities come, think real hard if you can make it work or just wait for the next opportunity when you saved up enough capital to fund projects.

as mentioned above, the downside to this is if it fails or you didn't profit you'll end up with debt. bad for you.


wsveridianojr

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Reply #10 on: Feb 02, 2012, 08:35 AM
Good debt  - umutang ka para mamuhunan
but here's the catch, kung hindi tama ang pagdadalan mo ng pera baka maging bad debt yan


Bad debt - umutang para waldasin

As simple as that =)



eugene

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Reply #11 on: Feb 02, 2012, 09:15 AM
Good debt = no interest on principal (it's better if it is pay when able)

Bad debt = you take out a loan or borrow money for

1. business operation (salaries, raw materials, utilities, overhead expenses, etc.)
2. business expansion (add branches, add equipment, add manpower)
3. finance of lifestyle (vacation, purchase clothing, jewelries, dine-out, etc.)
4. finance properties (cars, houses, condos, yachts, lands, etc.)
5. finance charity works (dole outs & loans to family, friends, etc.)
6. finance extra curricular activities (sugal, drugs, sports/club memberships, etc.)
7. finance family needs (tuition, hospital, funeral, daily subsistence, etc.)

I see  :hihi:
Thank you bauer  :D
Quote
good debt
-umutang ka para ipangcapital or pandagdag capital sa business mo

Though it seems to me that FE's good debt is bad debt on your above point 1 and 2.


Post Merge: Feb 02, 2012, 09:19 AM
bakit sir, may pina-utang ka ba na hindi na nagbabayad ad mamumundok na lang para makaiwas...parang indiana jones daw! may treasure hunt pa!

ala naman sir rds  :hihi:
pinagaaralan ko lang. isa kasi yan good and bad debt sa mga concepts sa Financial Literacy na di ko masyadong makuha.  :D

Post Merge: Feb 02, 2012, 09:27 AM
@Bp22estafa
Quote
basically if you can live without acquiring debt the better, stay away from debts or liabilities as much as possible.

I'll note that.

@wsveridianojr
Quote
Good debt  - umutang ka para mamuhunan
but here's the catch, kung hindi tama ang pagdadalan mo ng pera baka maging bad debt yan
so it depends kung kumita or not ung pinaglagyan mo ng puhunan.
« Last Edit: Feb 02, 2012, 09:27 AM by eugene »


research_solutions

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Reply #12 on: Feb 02, 2012, 09:46 AM
for me:

Good debt = Reasonable AND used for assets (puts money in your pocket)

Bad debt = unreasonable OR used for liabilities (takes away money from your pocket)

of course may exceptions:

Like kung maysakit ang non-PMT na misis mo kunwari, at wala kang pambayad.
It is REASONABLE but it was used for a Liability (She takes away money from your pocket OR wallet)


wsveridianojr

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Reply #13 on: Feb 02, 2012, 09:59 AM
Quote

@wsveridianojrso it depends kung kumita or not ung pinaglagyan mo ng puhunan.

Yup


eugene

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Reply #14 on: Feb 02, 2012, 10:02 AM
for me:

Good debt = Reasonable AND used for assets (puts money in your pocket)

Bad debt = unreasonable OR used for liabilities (takes away money from your pocket)

of course may exceptions:

Like kung maysakit ang non-PMT na misis mo kunwari, at wala kang pambayad.
It is REASONABLE but it was used for a Liability (She takes away money from your pocket OR wallet)
parang ung definition ni Kiyosaki sa assets at liabilities ah  :hihi:

Post Merge: Feb 02, 2012, 10:04 AM
Yup
so we cannot say then immediately kung good or bad debt nga since we have to wait for the results if the debt is related to business. tama ba?
« Last Edit: Feb 02, 2012, 10:04 AM by eugene »


 


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