Most people don’t have enough cash to pay for everything they need, which means that living debt-free is not realistic. But, did you know that some debt is good to have? Why? Because good debt has potential to grow in value and provide more opportunities.
Are you ready to lessen bad debt and have more good debt? Then here is what you need to know NOW about bad debt vs. good debt.
- Bad debt holds little or no value and can cost you more money with high interest rates. Examples of bad debt include credit card and auto debt. With credit cards, if you don’t pay the full amount, then you are charged interest so you’re losing money. With auto debt, individuals tend to buy more car then they need, and the reality is that as soon as you drive a car off the dealer’s lot, it loses value.
- Good debt provides value, and examples of good debt include student loans and home mortgages. Student loans typically have a low interest rate, and graduating from college can provide more job opportunities and higher future income. If you have a home mortgage, your home mortgage interest and property tax payments are tax deductible. You’re also building equity and putting money into a home you own.
For many, debt is a necessary part of life. Just remember that there is good debt and bad debt – and no matter what type of debt you have, make sure you pay your bills on time every month.
Also, if you are a renter, your rent payments can help improve your credit score. How to get credit for rent you pay? You can sign up for rent reporting services like RentReporters.