Amid record foreclosures, home prices continue to fall at record rates.

Homeowners who lost their homes or fell behind on mortgage payments may be comforted to know that no credit check payday loans can help them in times of financial crisis. However, homeowners who are still paying off their houses probably won’t like what I have to say next: The value of your home has fallen, and it is still going down.

Home prices in the U.S. broke records in November, when they fell 18.2 percent. That is the largest month-over-month  drop the U.S. housing market has seen.

A new reality

Composite data from cities that Standard and Poor has tracked show that home prices have fallen every month for 28 months. It used to be that homes represented good debt, meaning debt that would later create a profit or return on an investment. No credit check payday loans can represent a lucky break for people who have fallen victim to bad debt and gotten black marks on their credit reports.

However, now it seems that homes are in the same boat as cars: they drop in value as soon as you drive them off the lot. Or, in the case of homes, they drop in value as soon as  you sign the mortgage papers. Now would be a great time to buy a home in cash, but we all know that about 1 percent of the population has enough money to do that.

A little help

For homeowners who are in danger of foreclosure, there is a glimmer of hope. The Federal Reserve today adopted some new policies to prevent foreclosures. Specifically, the Fed will modify mortgages that were “rescued” from Bear Stearns Cos. and American International Group Inc.

For people with touchy credit who need to be rescued from overdrawing their bank accounts, no credit check payday loans can save the day.

McCray-Miller says she plans to introduce the bill after the Legislature convenes Jan. 12.

Necessity

The recession has wreaked all kinds of havoc on the everyday lives of Americans. However, it’s also causing people like McCray-Miller to assess the causes and come up with solutions for preventing a repeat performance.

McCray-Miller says, based on Americans’ increasing debt, education is needed for individuals to avoid another financial crisis. She argues that children learn by example, and they have watched their parents (and their government) accrue debt all their lives. Her aim is to break the cycle.

While a payday loan may be a welcome relief for someone in a bind, it’s certainly ideal if people can prevent financial emergencies when possible.

If it ain’t broke … oh wait, it’s broke

I think we are well past the point that people can argue there’s not a problem. Yes, we can blame mortgage lenders and creditors for causing this recession. But while we can’t directly control what investments banks and government entities do with their money, we can control what we do with our money.

Some factors that went into causing this recession couldn’t be prevented. However, educating children about the dangers of accruing bad debt is a step in the right direction toward a generation of individuals who are more capable of financial freedom.

Lesson plans

A 2003 law in Kansas already requires financial literacy to be included in Board of Education guidelines for lesson plans. Apparently this law isn’t clear enough, because some schools still don’t teach the topic. McCray-Miller’s hope is that her law, if enacted, will require that students be financially literate in order to graduate.

So what should be included in personal finance education? Well, I have a few ideas. First, if children learn the difference between good debt and bad debt at a young age, they are more likely to avoid bad debt. Also, students should know how to assess whether the terms of a loan are realistic. With this kind of education individuals will learn how to manage their finances in a smart way and avoid risky deals, such as sub-prime mortgages.

Impressionable age

Some may argue that Kindergarteners are too young to understand personal finance. I believe if the subject is broken down into its simplest, most rudimentary concepts and then built upon year by year it will be successful. It’s like learning math. First, you teach counting, then addition, then multiplication and so on.

So first teacher would educate students on what debt and credit are and then go from there. If students can understand the difference between negative and positive numbers, they should be able to understand debt. After they understand the concept of debt, teach what kinds of debt are dangerous. If children learn this at a young age they are more likely to believe the concepts are true and avoid financial hardship in the future.

Hope for the future

Emergencies do come up, and with so many people teetering on the poverty line, there will likely always be the need for an occasional payday loan. However, starting financial education at a young age will help the next generation to be smart about their money, even in tough times.

Debt, what was once frowned upon as an irresponsible act or circumstance of the less fortunate in society, is now embraced by the masses. Between consumer credit cards, bank loans, and payday loans, the average American now possesses an average of $9,200 in credit card debt with an average interest rate somewhere between 15 and 19 percent.

Debt is a lot more difficult to understand since we have gone from a predominantly cash-only society to an increasingly cashless society.

Since our evolution away from cash towards credit, we have developed habits that have put our society as a whole at risk.

Too much use of the plastic!

Financial Decisions Today Will Affect Our Family And Country Tomorrow

America’s credit addiction has left millions of families living with nothing left in reserve going from one paycheck to the next just trying to make there minimum payments. Many families use third party services such as payday loans to help make ends meet.

The growing fear of many experts  is the future of today’s debt-saturated generation. The wide availability of credit and irresponsible borrowing has left consumers putting more money into interest rates on financed merchandise than their 401k’s.

With promotions shouting the availability of finance options like “No money down”, “No payments” and “No interest for up to 36 months,” consumers have a hard time passing up things they want but can’t afford.

Knowing The Difference

Debt used to be more clear-cut than it is today, which requires us to know and understand the difference between good and bad debt so we can make smarter decisions for our financial futures.

The following will help you determine the difference.

Good Debt

Good debt is usually defined by the simple fact that it’s going to provide some kind of return. By return I don’t mean better entertainment value such as that which is returned tenfold from the purchase of a brand new large screen plasma display or LCD television. I also don’t mean cosmetic value such as that returned by putting a fancy new pair of rims on your vehicle. By return we are solely talking about the financial return that is returned to you as a result of your financed transaction.

Types of good debt would include things such as borrowing money for a home or for a college education. These things make good financial sense. A home, although much goes to interest over the life of the loan, provides an equitable return with age and usually becomes the single greatest asset that a person owns.

College, on the other hand, can create years of student loan payments, but the increase in wages due to the college degree more than endorse this as good debt because of the profitable gain that will compensates for the original investment.

Bad Debt

Bad debt is just the opposite. You can usually identify bad debt by the lack of equitable return, such as a rent payment. Financial gain is never reaped as a result of renting a home or apartment. Consumer credit card debt is also a bad form of debt if it is not paid off in full each month, because credit payments continue to take from you without any comparable return.

The Gray Matter When It Comes To Debt

Sometimes it is hard to determine whether a financed transaction will be good debt or bad debt. A couple of examples of these gray areas would be car loans or payday loans.

Car Loans

Car loans and the like would typically be considered bad debt because they are in a constant state of depreciation. However, vehicles are an asset that most can’t afford to live without and may be required simply to get to work and get paid, therefore cars are a worthwhile investment. But purchasing one should be carefully considered.

When buying a car, it is strongly advised that you don’t buy one new off the lot as a newer vehicle depreciates much quicker than one that is a few years old. Plus an older vehicle’s taxes and payments are considerably cheaper, thus saving you more each month.

Payday Loans

Payday loans are another area which would fall into the “gray area” when considering good vs. bad debt depending on what they are used for.

Applying for a payday loan just to get some extra cash for a weekend in Las Vegas is a prime example of bad debt, but if you were to use a payday loan to avoid the fees on a late mortgage payment, a payday loan could save you money, which would make it a perfect example of good debt.

Make The Right Choice For Your Future

Remember the key is simply to determine the equity of the transaction. Will it save you money or not? Before you charge or finance your next transaction, try to determine whether your purchase would be considered good debt or bad debt.

Good debt will leave you in a better financial position for a safer, more stable and more profitable future.

Borrowing money and incurring debt is a process that all Americans do today, even though most frown upon it. Auto loans, credit loans, payday loans, and various other types of personal loans have contributed to the loan frenzy today that has the average American in $8200 of consumer debt. That being said, there has been more fortunes made off of borrowed money then any other way, so don’t think borrowing money is bad because it is vital to your financial success.

The key here is what you are borrowing the money for. In this article I will help you to understand the good and the bad of borrowing. There is good debt and bad debt. Be sure to understand the differences between the two.

"A home purchase is an example of good debt"

“Bad Debt” is debt that is accrued that has no potential equitable value or investment return”

.

What I mean by this is that you will never see a return on the money borrowed. An example of bad debt is consumer store credit cards. What ever you charge on those cards will only depreciate overtime, plus you have the revolving credit balance that further taps you r wallet with interest charges. Financing a new automobile is another great example of bad debt. The moment a car drives off the dealer’s lot, it has already depreciated to some degree or anther and will continue to do so as each day goes by. Sometimes autos will depreciate so fast that you end up in a position where you can’t sale them for the amount you still owe on them. Bad debt loans will never return a profit to you where Good debt loans will.

“Good debt is borrowing money that is going to prove equitable over time”.

With good debt you will usually get a profitable return on your money. Perhaps the best example of good debt for anyone to possess is personal home loans and for more reasons than one.

When buying a home an individual may pay $750 on their monthly mortgage payment. A hundred dollars will go towards the principle amount and the other $650 will go to the bank in the form of interest (yes, they are paid well). The advantage here is that the equity or value of the home may be rising at an average of $1000 each month which means that you are in all reality getting paid $250 dollars a month to live there. You won’t get to see this profit until you sale the house but none the less, it is a real cash opportunity. I like to think of it as forced savings.

This also opens up widows of opportunity down the road for you to leverage your equity which is the difference between your homes value compared to what you owe left on your mortgage. Lines of credit and other possibilities are more easily established when you have established equity in your home.

In contrast, renting an apartment you may pay $600 a month for rent that you will never see a return on. Renting does nothing for your financial health.

“Know matter what the loan is or where the money is coming from, what it is used for is the key factor”.

Another great example of this would be payday loans or a cash advance. Most scoff at these types of loans however they are very easy to obtain and can get you out of some real trouble as well. Payday loans are short term, usually no more than 2 weeks and charge you about $15 dollars for every $100 dollars that you borrow. That can sound steep, however if for one reason or another you hit some hard times and need an extra $100 to pay your mortgage to avoid a $75 late fee, you will save yourself $60 in fees by borrowing short term payday loans. You will also potentially save a bad mark on your credit report.

Conclusion:

The smart use of money will save you thousands of dollars and make you many thousands more. I hope this helped you understand the differences between good debt and bad debt. There are many more examples I could use but I think you’ve got the picture.

To your financial success,