stay completely out of debt. Especially if, they want to make a large purchase that they can not pay for without taking out a loan. Good debt would be something like a home mortgage, car loan, or an educational loan. Debt is still debt, so does it matter whether it is good debt or bad debt? Yes, there is a significant difference. Everyone would love to be able to pay cash for a home, but there are few people that can ever do that. A home mortgage is good debt, but you still need to be smart when committing to such a large purchase. Always make sure you are not overextending yourself and you can truly afford the amount of your home. Never buy more than you can afford. Education loans for yourself or your children is an investment you will be making in the future. These are considered good debt. Before you choose to go into debt over a student loan make sure the choice in school and the program is unquestionably what you want. Do not make a dreadful choice, and end up paying your school loans for many, many years, but your new profession does not make enough to cover your loan payments. Home equity lines of credits are a gray area of whether it would be considered good or bad debt. Most people will use their home equity loans or their home line of credit to pay off their bad debt. Will that make it bad debt too? Some people believe it is, other believe it is not because it’s doing a good deed by freeing you from higher interest rates, but you still need to be careful! Bad debt such as credit cards and high interest loans are what most of us are trained to stay away from. Most people have some sort of bad debt, so does it truly matter? Debt is debt, right? Renting an apartment verse buying your own home is how you can better understand that good debt is not the same as bad debt. A home is an investment that you need. You can continue renting, but you are giving someone else your hard earned money. It is best in most cases for you to own your own home. This would be considered good debt. Credit cards are things you have purchased and most of the time they are things you truly did not need, and by the time you pay off those purchases the item no longer exists. So even though debt is debt, it does matter if it is good or bad debt.
]]>
