Many media outlets often see loans as dangerous and should be avoided.
Of course, if you use the ‘loan’ incorrectly, you may have a painful time under the weight, but it is difficult to see it as an essential problem of the ‘loan’ product itself.
Depending on how you use it, it can be a golden egg called money or a double-edged sword.
So how do we guarantor loans low apr? Let’s find out how to differentiate between good and bad loans and use them wisely.
What is a good loan?
A good loan doesn’t mean that the ‘loan’ itself has good attributes, but it does mean that you can use the loan wisely.
In principle, having no debt at all may be the safest position, but in the early days when many people, including the wealthy, make a family, they tend to use ‘loans’ to call assets.
This is to use the ‘leverage effect’. When you run a household, one of the important events is your home . Especially for Koreans, it can be said that the meaning of having my home is special.
Unfortunately, the statistics showed that the general public bought my house in Seoul, but it was possible to collect without paying a penny of about 12 years.
Therefore, it has become quite difficult to purchase a house entirely on our own. Since there is no room for trading, you have to rent and live on a monthly rent.
However, charter deposits are also currently accepted as loans, and monthly loans may be more burdensome than interest on loans at low interest rates.
In this case, you can shorten the time through ‘loan’. Using loans as leverage, purchasing assets that are not likely to go down in value as time passes, such as real estate, and rather likely to rise due to inflation, utilizes ‘loans’ to divide the principal and divide it with interest.
This is because the high-risk investment means represented by stocks may converge to a value of zero, but real estate has permanence rather than an attribute of extinction. However, in order to avoid risks as much as possible, the priority should be to adjust the principle to a level that households can afford through efforts such as using fixed rate loan products.
Real estate purchases that cannot be paid for by principal and interest can be turned into speculation, and it is very dangerous when household cash flows are cut or the market is down.
What is a bad loan?
Bad loans are loans for consumption. This is the main culprit of deteriorating household financial structure.
Loans for consumer goods with decaying value will be borrowed. Consumer electronics can also be considered as consumer goods. When many retailers and sales representatives are encouraged to purchase the latest models, they lead to installment purchases .
This shows an optical illusion that reduces the purchasing burden, and it is correct to consider installment purchase as a part of credit loan. In particular, luxury goods for new cars are one of the biggest factors encouraging them to use bad loans.
When investing in stocks, there are cases where credit loans are used instead of reserve funds.
How to use the right loan
First of all, you should try to manage your credit before using the loan product . This is because if credit is good, loans can be executed with good conditions at low interest rates. You can check your credit rating for free a certain number of times a year, so always manage it.
If you are reluctant to take a credit loan at a time when emergency funds are needed, you can use a reserve mortgage loan or an insurance contract loan to temporarily raise funds without affecting your creditworthiness. However, if it is difficult to repay within a short period of time, it may be better to cancel the deposit.
Loans are for investment, not for consumption. Therefore, when using emergency funds, it is better to prepare reserve funds in advance rather than loans, or to purchase insurance coverage for large expenses such as medical expenses .