ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The main disadvantage of debt financing is that interest must be paid to lenders, which means that the amount paid will exceed the amount borrowed.

Detailed explanation-2: -Generally, it’s fine to save and have some debt as long as: you’re keeping up with your mortgage payments. you’re paying off your credit card bill each month. you don’t have other loans or credit commitments that are costing you more in interest than you could earn on your savings.

Detailed explanation-3: -The negative impact of carrying debt can have a significant impact on your credit score. When you have a heavy debt load that you can’t pay off, your credit score will start to go down resulting in a bad credit score and report. The worst part is that it’s easier to damage your credit score than improve it.

Detailed explanation-4: -In general, debt that helps you reach your goals, like owning a home, paying for school or starting a business, might be considered good. Good debt might also help you build credit if you’ve practiced responsible credit use over time-and if that account activity is reported to credit bureaus.