Page 27 - Smart Money

Smart Money

Often people don’t know that there is a better alternative. They
are not educated about anything to do with money – keeping it,
spending it, insuring it. That’s what we at FinanceCorp do best.
We can educate you on how you should plan for the future.

Lack of knowledge results in Money Pain

Bad debt

Bad debt is pretty much anything that you don’t have the money to pay
for – credit cards, late payments, unsecured loans, things that don’t have
an asset attached to them that can be sold off and paid out. Mortgage, on
the other hand, is good debt – you are paying off an asset that is going to
be worth something. With bad debt, there is nothing there to help pay
that debt off.

Having too many credit cards means that you are probably only going to
pay 3% of the balance, and the more credit cards you’ve got, the more
money you have to pay. So this is definitely bad debt.

Generally, once you have spent on your credit card, you can’t remember
what you bought, and sometimes, you start not paying off the credit card.
Late payment fees get added on, and then you can’t afford the interest that
gets stacked on because you are not making the payments. The bank starts
charging you a higher interest rate because you haven’t been making your
repayments.

When people can’t get a loan through a normal bank, they go through
one of those pay-day lenders or similar where you will mostly likely pay
higher interest rates, and potentially fall further into debt. They “rob
Peter to pay Paul”. They’ll take money out of one credit card to pay off
the other credit card, and vice versa, which doesn’t get them into any
better position. They just get further and further into debt. Once you get
to a tipping point, it can spiral out of control very quickly.