When you think about debt, you usually think of all the negativity that surrounds it. Drowning in credit cards because you've only been able to make minimum payments. That dreaded monthly payment that makes you stressed out when you see it hit your bank account.
Examples of Good Debt
Examples of Good Debt
Small Business Loans: Being your own boss is often rewarding and challenging both emotionally and mentally. If you succeed with your business, you should be able to pay off your loan within a time period that makes it a worthwhile investment.
Examples of Good Debt
Mortgages: A good strategy as a homeowner is to buy a home, live in it for a few decades, and then sell it for a profit. Or if it's your “forever home, you can own a home free and clear with no monthly payment.
What is Bad Debt?
In simple terms, bad debt is debt you are not able to repay or is on something that does not have positive cash flow. Think anything that is hindering you from progressing financially.
If you decide to make a purchase that will increase your debt, ask yourself if taking on the debt will benefit you financially in the long run. Is it financing a venture that could reward you in the future, or is the money for a short-term impulse purchase that is satisfying an immediate desire?
Taking out a debt consolidation loan from a bank or other reputable lender can be beneficial because they have lower interest rates. Just make sure to use the cash from the loan to pay off debt and not use it for personal purchases. Also, make sure you are creating new financially savvy habits to replace the bad ones.