What to know before Buy Debt

We all know about debt. If you don’t have too much as an individual you can increase the quality of your life, but with more than you can handle it can make your life a nightmare.

There are two kinds of debt. Usually it is personal and used to buy a depreciating item such as a car or entertainment. 

Today a car has become a necessity, but it doesn’t mean you have to buy a new one every 2 years or one that is beyond your means. It should be thought of as transportation.

The second kind of debt creates an asset that produces income that will more than pay off the debt. For a business this can be a truck, a new machine, even a new building for office or production. 

A person may borrow money to continue education so there can be career advancement. Money borrowed for production is very healthy.

You can invest in Bonds online in India, Bonds in India, Types of Bonds in India as well Buy Bonds online from Bondsindia.com

A mortgage is a necessity and can be classified as creative debt. You have to live some place so you have a choice of rent or mortgage payments. Most everyone prefers the latter as it creates an asset as well as shelter.

Before taking on any type of debt it is wise to determine the risk. Debt creates risk. For personal noncreative debt you must consider your income that will allow repayment of the obligation especially if it is one that has no value to anyone else such as a vacation or flying lessons. 

Do not borrow money to go to the racetrack or gamble in the stock market. The first consideration when borrowing is what will happen if I can’t make the payments? Will what I have purchased have any remaining value that can be sold to reduce the balance remaining?

If the balance cannot be repaid you want to do everything possible to avoid bankruptcy as that can haunt you for the rest of your life. Debt consolidation is sometimes a solution. 

For a business there is a preliminary bankruptcy that allows the court to appoint a special manager to watch over even run the business until it is back on its feet or declared defunct.

The world as we know it swims in a pool of debenture (Invest in Debenture online, buy debenture online in India). 

Business today could not survive without some form of borrowing nor could the consumer have all the conveniences that make living a pleasure — washing machines, TVs, air conditioning, garage door openers, can openers, computers just to mention a few most of which are obtained with the help of a credit card.

Keep in mind the 2 kinds of debt — the kind that creates an income producing asset and the kind that does not. 

You must decide how much of each you can afford.

There is nothing wrong with debt as long as it is used intelligently.

Comments

Post a Comment

Popular posts from this blog

Bonds India vs GoldenPi- Online Bonds Buying Platform

Image
  Bonds India vs GoldenPi : Most Indians have little experience with the direct purchase of bonds. A greater reliance on fixed deposits and inaccessibility to the bond market are primary reasons. However, with the advent of bond platforms, trading in bonds has become as straightforward as trading in equity. Bond platforms give investors a one-stop solution to trade in bonds. These platforms allow retail investors to choose from bond categories like G-sec to capital gains bonds. The lower minimum investment requirements of these platforms have attracted investors from all wealth segments. As a result, more people today are including bonds in their portfolios due to the services of bond platforms.  How to Choose A Platform for Buying Bonds   BondsIndia  and Goldenpi are two popular platforms for retail investors to buy bonds online. Bonds India is a one-stop-shop for a wide range of fixed-income securities like bonds, G-sec strips, and fixed deposits (banks and corporates).  Variety to C
Read more

How to Invest in Government Bonds in India

Image
  Government Bonds India  are supposed to be among the  safest investments in India  in which was why they skyrocketed in late 2008 when there was panic in the stock market. In the popular documentary series "The Ascent of Money", Niall Ferguson, a respected British economist and historian, went back into history to the times when  government bonds  have gone bust before and explained the reasons why it happened and the subsequent consequences. He used Argentina as an example. Starting from 1975, the  Indian government had to sell a lot of bonds  to raise money to fund 2 wars. The government debt became so large that people lost faith that the government could pay the debt back and nobody wanted to  buy the government bonds , causing the bond yield (interest) to be very high. In order to be able to service the interest payment, the government had to keep printing more money and that caused hyper inflation. By December 2001, the government finally defaulted on their  bonds . I
Read more

Which is the Best Bonds Trading Platform in India?

Image
One of the major reasons why a lot of investors opt for   bonds   is that they carry minimal risk compared to other financial asset classes like equities, leveraged ETFs, futures and options, and a few others. To date, some of the investors still assume or think that bonds can only be bought over the counter like penny stocks, ADRs, etc. Although there’s that offline option available for investors, this leaves us with the question of where else one could   purchase the bonds ? Well, the best guess to this no-brainer question is — online. Witnessing the surge in demand for bonds over the last few years gave rise to numerous online bond trading platforms in India. While this has enabled investors to pick the   best bond trading platform   from the multitude of options, it’s still a conundrum for many of them. Now, before we jump any further, let’s have a basic understanding of the   types of bonds   markets in India. who are the best trading platform in India Primary and Secondary Bond M
Read more