short term loans

Are Short Term Loans Bad?

We are often told that all debt is bad. We are told to be scared. They tell us to stay out of debt. But many professionals have said that Debt is useful and safe if used correctly. The likes of Robert Kiyosaki (Author of Rich Dad Poor Dad) have said that debt is a useful vehicle to growing ones wealth. So if not all debt is bad, are Short Term Loans bad?

How can we tell if a loan is good or bad? The best way is to speak to a professional financial advisor. Debt itself is not bad, but why you have the debt and what it is used for is what determines if it is bad or not.

What is a Good loan?

Good loans are often described as loans that help you bring in more money. This is often around buying and acquiring incoming producing assets like rent out properties and manufacturing equipment. These assets essentially produce more money than they cost in a low risk environment.

What is a Bad Loan?

A bad loan is often described as a loan that is caused by irrational or unnecessary behaviour. Or it can be for buying unnecessary things that do not add value to your life or increase your earning potential. This is often referred to as impulse buys or binge shopping.

So where do short term loans fall into the mix?

Well as always it depends on what you are using the loan for. If you are using it to buy some new equipment that will help you produce more money or for business expansion. It could be worth it. But if you are using a short term loan to buy something that you want. This is often considered as not the best financial practices.

As always, we recommend speaking to a financial advisor or financial planner who can assist you in figuring out which category your situation falls into and how to improve your current financial situation. These professionals are well equipped and licensed to provide all the answers you need.

The financial world can be confusing. It can also be very tied to our emotions. Making sure you are making good financial decisions is vital. While short term loans are not all bad it is worth sitting down with a professional to consider if it is a good option for you.