The Concept & Advice on Extinguishment of Debt

By August 31, 2012 October 7th, 2014 Blog

Mr. Gerard Colaco: Extinguishment of debt means getting rid of debt, or not getting into debt in the first place. It is important to distinguish between acceptable and unacceptable debt, productive and unproductive debt. Any debt which is designed to automatically end itself is better than debt which remains open indefinitely.

A housing loan or vehicle loan is debt which is repaid in instalments and extinguishes itself over the loan period. On the other hand, personal loans, personal overdrafts and credit card loans are examples of debt which remain open.

The worst type of debt is credit card debt. In India the rates of interest on this type of debt presently vary between 24% & 48% per annum. Every individual must guard against ever getting into a debt trap.

If an individual does not have a house, and does not have the resources to purchase a house right away, a housing loan could certainly be considered provided the loan instalments can be paid with a fair degree of comfort. All other types of undesirable loans should be extinguished before embarking upon investment.

error: Protected content! Copyright Simplus.