The Difference Between Good Debt & Bad Debt

GOOD DEBT VS. BAD DEBT

Not all debt is bad. In fact some debt is very good. Debt enables you to do things you would normally not be able to do, i.e. go to school, start a business or build a home. However, bad debt can have damning effects to your credit. Learn more about the effects of having bad credit.

Below is a list of some of the common types of fixed and discretionary expenses and what their effect of credit is. If you do not know what these types of expenses are, you should examine the fixed expense vs. discretionary expenses section.

Car Loans
A car loan is a good debt because you get asset out of the debt. It is also regarded as good debt if you necessitate a nice car for work in order to further your career, i.e. real estate agent. On the contrary, if you take out a car loan that you cannot make payments on, it is obviously bad debt.

Lending to a Family Member
Unless you are going to be collecting interest or gaining some sort of referral. This is a bad debt. In general, lending to family is a dangerous practice.

Student Loans
Student loans are good debt if they allowed you to finish college and further your dreams. They are bad debt if you dropped out of school after only two years of completion.

Business Loans
If you take out a business loan and it helps you make more money, it is good debt. A business loan is bad debt if you can not afford it and/or it does not help further your business goals. Learn more about the business loans we offer.

Credit Cards
Credit cards are an excellent means for financing emergencies or buying large purchases that you can not afford to pay for all at once. Credit cards are good debt if you can afford to make your credit card payments timely. If you can not, then it is bad debt.

Home Loans
Mortgages allow you to own your own home and build equity. Therefore mortgages are great debt.

many of Understanding the difference between good and bad debit should help you identify the early warning signs of debt trouble

Managing Debt
Personal Loans for Paying Off Credit Cards
Planning a Budget is a Good Strategy
Changes In Spending Habits
Budgeting Tips
Problems With Overspending
Locating a Financial Counselor
How to Save Money If You Have Kids
How to Save Money by Changing the Way You Buy Food
Dealing With Collection Agencies
Dealing With Creditors
Dealing With Collection Agencies
Debts That Are Not Dischargeable By Bankruptcy
Paying Off Credit Card Debt
Understanding Debt-to-Income

A more detailed summary about good and bad debt by Bankrate.

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