What debt are considered a good debt?

[Agung]

What debt are considered a good debt?

[citicredit.asia]

1. Home loans. A mortgage can be a great debt. Not only does it permit you to own your own home, but it also allows you to build home equity. It is an asset, people who are financially savvy earn interest and equity. People who are not financially savvy pay interest and create money for others. For example, charging groceries means that you will pay about 17 percent interest on items that will be consumed within a week. A financially literate person would never do that.
2. Car loans. A car loan can be a fine debt because you get something long-lasting out of the debt. If you need a nice car for your job (if you are a real estate agent, for example), a car loan may be considered good debt because it helps you in your career. However, a car loan that you cannot afford is a bad debt because it detracts from your life.
3. Business loans. If you can service the loan, and it helps you make more money, the loan is good debt, but if the loan is nothing but a source of problems for you, the debt is bad.
4. Credit cards. Credit cards are fantastic. They are convenient and easy. They can help finance a business or even medical emergencies. The problem with them, as you probably know only too well, is that it is too easy to fall under their siren spell and get in over your head before you know it. That's when they begin to hurt your life more than help it.

[angie1313]

The only bad debt is the one you cant make your payments on...:)

[mirage12]

And the other example of good debt is paying for college, when it comes to paying for your children's education, allowing your kids to take loans makes far more sense than liquidating or borrowing against your retirement fund. That's because your kids have plenty of financial sources to draw on for college, but no one is going to give you a scholarship for your retirement. What's more, a big 401(k) balance won't count against you if you apply for financial aid since retirement savings are not counted as available assets.

[Matthew-HTDI]

The only bad debt is the one you cant make your payments on...:)

Couldn't agree more... Also, be sure you have a good mix of those debts to help maximize your score, but as for those credit cards, you want to keep the total balances at or below 30% of the total credit lines available.

[angie1313]

Couldn't agree more... Also, be sure you have a good mix of those debts to help maximize your score, but as for those credit cards, you want to keep the total balances at or below 30% of the total credit lines available.


Great point that I should have brought up too. Thanks for helping me out!

[FSCTom]

I came across this post via Google and wanted to contribute. I really don't think there is "good debt" out there. I love having a clean slate including my home. I just can't STAND having debt. But if I had to say there's good debt, I would only choose 2 -

College loans - This is good debt because you're going to school to improve your chances of increasing your salary.

Home - It's hard to pay 200k for a house, so this is acceptable debt as well but I still think people should attack this.

[bobbykorey]

The only bad debt is the one you cant make your payments on...:)

You are absolutely right.... you can consider everything else as a good debt...;):)

[Fedrik]

I think every debt can be good or bad depending on the status of debt.

Also above mentioned debts are correct.

[andylewis]

Hi,
I agree with Matthew. The only bad debt is the one you cant make your payments on..
Andy