Personal finance basics: loans and debts
Personal finance has 2 major challenges there are loans and debts. These two powerful instruments can be the force that raises your ability to build your life or slow your progress. Loans and debt are very different even though they may seem very similar.
Loans are when you borrow money from a person or entity. When you borrow on a loan you agree to pay back the loan with interest. The interest is what gets people to loan you money. Typically the amount of interest owed is going to be based how safe it is to loan you money. After all the person loaning needs to feel confident that they will get their principal back in addition to the interest.
On the other hand where a loan is an item. Debts are a state of being. If you are in debt you are in the state of owing other people and organizations money. Debt can take many forms from loans to credit cards. In a sense all loans are debt, but not all debts are loans. Debt is most commonly seen in credit card debt. When you have debt you should be working towards paying it off quickly so that it doesn’t accrue interest. Interest from debt can be very high. In many instances the amount of increase on interest can outperform even the strongest stocks so you should always be aware of the dangers of interest in debt.
Debt and loans are tow things you want to avoid. To do this stay with-in your means and do your best to save money to keep what you have,.