In Sri Lanka as with many other countries, the perception surrounding the word “Debt” is considered as a stigma. Ask anyone in the streets they would immediately tell you that the more debt you take on the more difficult its will be to live your life. Although this is true to an extent, on a more contemporary context considering the importance of personal finance has become debt is seen transforming from a mere liability to more of a tool that is able to supplement your personal finances in achieving financial stability. Here we will be discussing 5 reasons as to why debt when used the correct way can be beneficial for you to improve the management of your personal finances.
- Boosting your credit score:
This is probably the most important aspect when it comes to utilizing debt. From a more technical standpoint, accepting debt and paying it off in due time will gradually increase your credit score. This can be beneficial in the long run as you increase your credit score, the more you will be able to seek better quality debt from sources via the reputation and trustworthiness you have established through time.
2. Credit card refinancing:
Accumulating credit card debt overtime is always a pain specially with the accumulated higher interest. You can easily mitigate this by seeking personal loan providers. These sources will provide you with the ability to obtain debt for lower interest rates. This will ultimately aid you in settling your credit card debt.
3. Borrowing to create wealth:
In a more technical term this is also known as “Gearing” or “Leverage”. This is one of the best methods in using debt wisely. By utilizing this technique, you will be able to use debt to purchase an asset. Overtime you can increase the value of the asset and let the asset payoff the debt thereby intime the asset would generate enough cash which would exceed the cost of the debt.
4. Using debt transformation:
This technique can be utilized if you have received a substantial lump sum and works in tandem with the previously mentioned concept of gearing. You may attempt to pay off the bad debt from the lump sum and then borrowing again (maybe the same amount) for investment purposes which will aid you in creating wealth over time.
5. Creating awareness for debt tolerance:
As a general rule of thumb, accumulating debt can be harmful. This is especially true with bad debt such as car loans where you will be borrowing money to procure an asset which depreciates over time as well as credit card debt which is infamous for higher interest rates. However, when leverage to settle bad debt, you will need to take note that there is going be more risk involved. Also borrowing to diversify your portfolio would incur more risk as well where you will be going through a volatile phase if you are determined to payoff your investment related debt in a set amount of time. These kinds of scenarios would help you in keeping tabs on your debt tolerance.
How Helios can aid you in obtaining good debt
As Sri Lanka’s first peer-to-peer lending platform, Helios P2P offers short to mid term personal loans to get rid of bad debt like the ones from credit card or for other debt consolidations. By filling out an application and uploading the relevant documents, Helios P2P is be able to grant you a personal loan with easy repayment options with interest rates ranging from 1.25% to 25% per month. So what are you waiting for? Get access to good debt today with Helios P2P.