Good Debt, Bad Debt: How Do You Know?

Thumbs up or thumbs down on debt?

Good Debt, Bad Debt: How Do You Know?

Not all debt is created equal. Believe it or not, there is such a thing as “good debt”.

Good Debt

Good debt is borrowing money for something that gives you value long-term, and maybe even gain value over time. Examples of good debt could be:

  • a student loan.
  • a computer if you use it to get a job or build your skills.
  • a mortgage for an affordable home.

Bad Debt

Bad debt is borrowing money for something that will lose value as soon as you buy it. Examples of bad debt could include non-essential items like:

  • an expensive phone.
  • a new vehicle.

Good Debt or Bad Debt?

Before you borrow money, ask yourself:

  • What is the total cost of the item, including the interest I’m paying?
  • Will I be better off financially in the future if I purchase this?
  • Will this be a “good debt” or “bad debt”?
  • Is this something I need or something I want?

If your answer is “bad debt”, consider ways other than taking a loan to get what you need or even want. You and your financial well-being are worth the extra effort!

If your answer is “good debt”, then begin learning about different types of loans that could be available to you – link to: “Should I Get a Loan or Buy This on Credit?”.