There are lots of misconceptions about debt because it has become one of the major problems in the United States. People tend to see it as bad but on the contrary there are good debts as well. Continue reading to know the difference between the two debts.
A good debt is when you make more money than what you are paying. Below are some of the examples of good debt.
Student Loans ? This allows you to get a small loan today so that you can make more money for the rest of your life. In paper, the extra income should be enough to pay back all the debt.
Mortgage ? This is something that can be good or bad. If you had a mortgage in the early 1990?s, then there?s a chance that you own a house that appreciated in value. But if you purchased one in the past couple of years, there?s a chance that the value didn?t appreciate and if you sell the property today, it is better if you have rented. But in most cases, mortgage is tax deductible.
Work necessities ? Most people don?t consider getting a car loan but this is needed if you need a car to get to work. To be a good debt, the vehicle should be used purely as transportation between two points and not as a status symbol. When the added expense is needed to protect your source of income then it becomes a good debt.
Bad debt is something that doesn?t help your finances. A loan that has interest rates of 20 percent is considered a bad debt. A loan to pay for a vacation is a bad debt. You might be refreshed and ready to earn more money after coming from one but make sure to make the finances in the positives first.
Source: http://www.paydayloansmag.com/difference-between-good-debt-and-bad-debt/
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