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When is it smart to be in debt?

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By: tiarajoseph11
on 30th Jun,2016

Are you getting worried due to your debts? Face your fears and learn when it is smart to be in debts.

No one will advice you to live recklessly and fall into debt, but there are situations when it becomes necessary to stop paying off your debts. These are the few circumstances where incurring debts could be a wise decision.

1. Transferring balances to a 0% APR credit cards

If you are a part of the credit card industry, you might have seen that several 0% APR credit cards have been launched in the market. The credit card companies attract the consumers with a low-interest rate as an introductory offer. Many 0% credit card offers will last for 12 months or more with an interest-free financing. You must remember to tap the available full amount. You'll need to pay a 3% fee on the total amount. If you're fortunate enough, you’ll hit a $10,000 investment line with a 10% return. Liquidate the return after a year, you'll have $1,000 in hand from which you can easily pay the $300 transfer fees, and you can still pay off your credit card debts.

You have to pay minimum payments every month so you don't lose the 0% APR opportunity. When the promotional offer ends, stop using the card and go for another offer.

2. Holding on to mortgage

Try to convert your 30-year mortgage into a 15-year mortgage! Your monthly mortgage payments may be higher, but you'll save a lot from interest charges, and you'll get back the ownership in half of the time given by the bank.

If you are now living in an area where home prices are rising quickly, implementing the opposite strategy will be a wise decision. The upward price in local housing areas will create new equity, and low monthly payments may give you space to enjoy your home instead of being a slave. Apart from that, you can also refinance your current mortgage at a lower interest rate, it can save a lot for your wallet.

3. Borrowing from parents

Borrowing from your parents will be difficult. Taking money from your parents may create a problem for them. Your parents may break their nest egg and provide financial help to you.

If you owe $10,000 on a high-interest card, you must act smart. Meet your parents with proper documentation of how you incurred the debt. Convince them that you’ll use the $10,000 loan to pay off the high-interest card, not in any amusement thing. Ask them to form a repayment option so that you can also pay the money back slowly.

4. Letting your debts as it is

Some creditors will go after you again and again until you pay them off. But at a point of time, they will also lose hope and become silent. This strategy is not so popular to start afresh. As per the federal law, credit reporting agencies will remove most debts from the credit report after seven years. Since your credit score already got a blow by the debt, so you have nothing to lose. Once you make a payment, you can accept the debt again and give the debt collector more time.

5. Having a student loan

Federal laws make it difficult for a teenager to obtain credit cards. Consequently, it also gets difficult for those teenagers to build a positive credit history. As a form of debt, you can take out student loans to build credit. But make sure you take out a loan of proper amount that you can repay after getting a decent job. If you can’t afford the monthly payments (which eventually starts as soon as you get a job or after finishing your studies), it’ll be a very big problem for you.

The standard repayment plan comes with 10 years of the time limit with a federal student loan for a bachelor's degree. Borrowers of these loans are eligible for repayment options that could postpone their payments, lower a number of their monthly payments or even erase their debt altogether.

6. Getting a business debt

Many people opt for a business loan to initiate their personal, small business after completing their graduation. But, it isn’t right to consider these debts as bad debts since the loan is utilized to increase your net assets and to earn a good income.

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