(ThyBlackMan.com) ‘Bad debt’ isn’t a description of how much debt you’re in; it’s a term used to distinguish certain types of debt from others. Yes, this means there’s a counterpart to this called ‘good debt.’ Today, the focus is on bad debt as it’s a type of debt nobody wants. In essence, this is where you owe lots of money with very little to gain from it. Payday loans are an excellent example of bad debt because you borrow money and end up with massive interest charges but see no long-term benefits.
Keeping that in mind, you have two main concerns: avoiding bad debt and getting out of it. So, this post is split into two main sections that provide advice on both areas:
How to avoid bad debt
Avoiding bad debt is far easier than you think. It’s a simple case of asking a couple of questions before you borrow money:
- What will I gain from this debt?
- How much will this debt cost me?
In terms of what you will gain from the debt, think about how your life will improve if you borrow the money. Let’s go back to the payday loan example; what do you get out of this transaction? Perhaps you have some temporary relief as you can pay your bills this month, but 
what about the next month? You may struggle to pay your bills again because you’re paying off this loan! By contrast, look at a mortgage loan; you gain a property that belongs to you, meaning you have a very valuable financial asset for the rest of your life. So, it’s worth borrowing money because there are benefits.
As for the debt costs, you mainly want to look at interest rates and additional fees. If a lender slaps crazy interest rates on a loan – along with massive fees – it’s a sign this is bad debt. It’ll cost far too much, usually tricking you into falling into a debt trap.
How do you get out of bad debt?
Getting out of bad debt is more challenging than avoiding it. Nevertheless, there are a few tactics you can try to free yourself from this problem. Firstly, you can seek the help of services like DTSS Sovereign, designed to help people discharge their debts. You’ll find plenty of debt-relief services out there that are willing to assist you.
Secondly, you could consider a debt consolidation loan – which, ironically, is an example of good debt. Here, you borrow money to clear all of your different debts, usually putting you on a new repayment plan with lower rates and more manageable monthly payments.
Thirdly, and this is the last resort, you might have to file for bankruptcy. Doing so will clear all of your unsecured debts and allow you to start afresh. Don’t jump to this idea straight away; it’s something to only consider when nothing else works.
In conclusion, bad debt is something to be avoided at all costs. It’s the worst type of debt to have as you’re not in a better position when you clear it. Your life hasn’t been improved – if anything, it’s worse because you’re in a less fortunate financial position!
Staff Writer; Steve Love