Debt Loans Will Be Harder to Come By

Executive Summary By Tiffany Dow

debt loans

What with all the talk about bad debt and the current massive failure of so many housing loans and the consequential implosion of the financial institutions that financed them, you can be sure that debt loans, of any kind, will be harder to come by.

Just what is good debt? Good debt is when a loan is based on tangible assets, like a home, boat, car, etc., or any kind of real estate. It is something that could be seized and sold to pay-off the outstanding debt should the owner default on the loan.

A bad debt is any debt that is based on something that was unsecured, immediately consumed or never tangible. An unsecured home loan is a loan assuming you will be able to pay for something based on future income. Liberal lenders who made loans to folks who would not otherwise qualify for a home loan are tasting the bitter medicine of failure.

Possibly the worst kind of bad debt would include buying dinner out (consumed), gasoline for the car (consumed) or a vacation to Hawaii (never tangible). It is far wiser and safer to buy things we can afford and not extend ourselves through debt. How much better it would have been to have saved up a substantial down payment to buy a home, using good old fashioned discipline, than to now be suffering the loss of a home due to an unwise promise to pay.