Sometimes debts can be split into the category of good or bad. This is because some borrowing can be almost necessary for us to be able to improve ourselves. For example, most people that own homes would not have been able to do so without borrowing the money. However, some borrowing will buy unnecessary items at huge expense. It is not just the purpose of the borrowing that is important but the type of loan and the cost of the loan. It is wise to think about whether any borrowing that you want to do is good or bad debt.

The purpose of the borrowing

Think about why you need the guarantor loan before you do anything else. If it is for an emergency, to pay something you cannot go without or to buy something which will better your future then you could think of it as good debt. Especially if the loan is only for the short term. The problem with trying to decide if something is good or bad debt is that it is not always easy. Therefore, be certain circumstances which you cannot predict that if they go one way make it good loan but if they go the other way make it a bad loan. For example, if you want to buy a car which is necessary for a certain job then using a loan to buy it could be considered to be good debt. However, if you do not probably check the car before you buy it and it keeps needing repair or stops working altogether then tis would be considered a bad loan. You will not have known when buying that car that it was going to do this but you should weigh up the risks. In this case, if you buy the car from a dealer then you will be able to go back to them if it is problematic as you should have a warranty and this will reduce the risk and make the loan more likely to be good debt.

The cost of the loan

It is also necessary to look at the cost of the loan. You want to make sure that the loan gives you good value for money. This can be tricky when you may not be sure how to compare loans well. However, if you look at the APR figures you should be able to calculate the total cost of the loan which will help you. It is wise to also find out how much the repayments will be. This will allow you to calculate whether you will be able to afford those repayments. This is so important as your ability to repay will determine whether this is a good loan, that is affordable or a bad loan which is not. Miss payments also cost money so you will end up paying more money for the loan if you miss any repayments.  Choosing the right type of loan, comparing lenders and using the one that offers the best value for money and checking that you can afford the repayments are all really important features and a good loan will be affordable and good value for money.

So, you can see that it is not that easy to decide whether a loan is good or bad debt. A guarantor loan can be one of the more expensive types of loan. However, if you have a poor credit record then it could be one of only a few options available to you. This means that you could find that for you it might be good debt. You would obviously need think about why you needed the money and whether that was a good reason and compare the guarantor loans to see which would give you the best value for money. Although repayment can be covered by a guarantor in this type of loan, it is still wise to make sure that you feel you can make the repayments as the guarantor is only supposed to be there as an emergency back up. As each of us is different and in different circumstances it will up to the individual to judge whether they feel they are taking out a good or bad loan. This is not always easy and it can be wise to see if you get help with this decision. Asking someone close to you to talk it over with you can help. They will not be so emotionally attached to your decision to borrow and so may be able to look at things from a different point of view that could be helpful for you. It is worth spending this time thinking and deciding. You might be impatient to get the money but if you rush the decision you could regret it but there may be no going back once you have spent the money that you have borrowed.