Debts: Are They Bad Or Are They Good?

Mon, Feb 11, 2008


As many would have known, prior to my enlistment in the army, I was working for a marketing company, promoting credit cards, money lines and personal loans to people out there.

I do not know, whether I am biased or not.

Compared to my stinct in that company and my stinct in NTUC Income, I realised majority of my clients in ABN Amro were GUYS.

Compared to now, I have lots of FEMALE clients. ๐Ÿ™‚

I guess, guys love the prestige of having credit cards.

Whereas female loves to save.

hahahh….Maybe that’s an assumption on my part. ๐Ÿ™‚

Today, I am going to talk about debts.

Are they good or bad?

Are DEBTS good or bad?

I remember my mother used to tell me to avoid debts like a plague.

She advised me, when I do anything, avoid debts.

Its going to haunt you for the rest of your life.

I understand her beliefs because all my uncles used to be wealthy businessmen.

Yes…Rich, rich businessmen.

Afford to have own bungalow, own 2 cars at one time, and spend money like there is no tomorrow.

Finally, realised that they are saddled by mounting debts.

…. and bankrupcy knocks on their door.

Ladies and gentlemen, credit cards debts are bad.

@ 2% per month, 24% per year, your credit card company is already earning like Warren Buffet.

If you invest in a fund with such a spectacular return, you money will DOUBLE, every 5 years.

To me, this is stupid for one not to clear his outstanding balance when the time comes.

Small numbers add up very fast.

That is an example of a bad, bad debt.

Good debts can be like mortgage loan.

In Singapore, mortage loan interest rate in Singapore is about 3%/year.

In Malaysia, it is about 8%/year.

If you can buy a property on a mortgage loan, and you can achieve a rental yield which is higher than the mortgage loan interest rate, you are doing good.

What you are having exactly, is a good, good debt.

Capital appreciation for Malaysia properties in places like Danga Bay, at Johor Bahru, is climbing fast.

Just last year, it increase by 40%. (Other locations only increasing at 5%)

I am accumulating my money fast now, to get one condominium there in 4 years time.

I will do my best to get it using full cash, to avoid the high mortgage rate. (which is bad debt, since the rental yield is not that high now, and capital appreciation is for general properties in Malaysia is about 5% now)

When I buy properties in Singapore, I can afford to get it with a mortgage loan interest of 3%, as NTUC Income investments itself is giving higher return than the mortgage loan interest rate. (This mortgage loan interest is also known as good debts).

If I were to pay everything using cash, I will have lose in terms of the opportunity costs of investing the money to get higher returns.

So my friends, again, debts can be good.

OR debts can be bad.

You do your own analysis and you make your decisions at the end of the day ๐Ÿ™‚


p.s. By the way, if you wish to discoverย a simple & halal way to create a positive monthly cashflow and calculate your net worth for FREE,ย then please click hereโ€ฆ

This post was written by:

- who has written 440 posts on The Official Helmi Hakim Website.

A certified financial consultant, Helmi Hakim has won praise for his patience, perseverance and practicality when solving his clients' financial concerns. For more information on how you can manage your finances better, contact Helmi Hakim at 96520134.

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