The Difference Between Healthy and Unhealthy Debt

In today’s unpredictable economic climate, it’s no wonder that so many Americans live with debt. With the rising costs of college tuition, medical bills, and rent/real estate, getting into serious debt can sometimes seem unavoidable. Without the means to pay our own way, more and more Americans are relying on major loans to make ends meet. Buried under the weight of such debts, it can be easy to forget that there can be a way out.

While any financial advisor will suggest following a careful budget, it’s easier said than done when you’re only making minimum wage or you’re hit with massive unexpected bills. Sometimes, no matter how much you plan, if you don’t have significant savings to act as a safety net, your weekly finances won’t cover all that life throws at you. A huge flood in your basement demands immediate restoration, even when you have little funds to cover the cost. When the vehicle you rely on to get to and from work breaks down, you have to pay for its repair right away if you want to keep earning money!

But remember, borrowing money to afford these sudden expenses isn’t a sign of failure — if you do it right. Assessing your debts and making educated and healthy decisions about future loan opportunities can keep you financially fit. Avoiding credit cards that have huge credit limits is essential, as these accounts act as an enticing source of seemingly limitless funds. It’s easy to use them to cover small purchases every day until you end up owing more than you ever intended. When the average no-fee credit card has an APR of 19.99 percent (far higher than those rates attached to mortgages, student loans, and personal loans), interest rates add dollar after dollar with every new bill cycle. If you don’t pay off the debt immediately after accruing it, then the interest can make you end up owing more than the initial purchase itself.

Credit card companies have created an easy trap to fall into. They set low minimum monthly payments with high spending limits. They hope that you continue to use your card to make small and large purchases while you rack up interest. Left unattended, the compounded interest starts to rival the cost of the purchases, until eventually you can’t pay off the amount owed. Minimum payments are made while you still use the card, adding more charges to the total, and soon enough you’ve spiralled into a near-irreversible cycle of debt.

While credit cards can certainly be a source of ‘bad’ debt, there are healthier alternatives. Limited loans with fair interest rates and flexible repayment schedules are crucial for anyone who wants to manage their debt and pay the bills. One positive alternative to the credit card trap is the flex-pay installment loan; this is a one-time, fixed cash advance for those who meet a few minimal requirements. On average, first time borrowers can qualify for up to $1,000. Unlike other loans (like payday advances) the flex-pay installment loan allows the borrower to negotiate a more manageable repayment schedule. Instead of paying off the debt in one lump sum at the date of your next paycheck, your repayment can be broken into different parts over a longer period of time.

Navigating flex-pay installment loans can be simple if you contact a reliable third-party lender within your state. Lenders who care about your financial health will consult with you, so that you can agree to a loan limit and repayment schedule that’s within your capabilities.

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