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Good Debt, Bad Debt – What’s the difference?

good debt bad debtThis is a guest post written by someone that we met through the My Blog Guest site. We feel privileged to host his post here in our site, since it is always a pleasure to help others in the blogging community.

Differentiating between good debt and bad debt

Debt in general is considered to be bad because you are required to handle the debt payments and you can end up saving nothing for yourself each month. In fact debt is a thing that is to be avoided at all costs. But there are some debts too that are good for you because you are incurring it for some useful purpose and not simply borrowing the money to buy something that is not of much use but is only a thing of your liking. There are various debt relief options that can help you to get out of debt but first of all it is important for you to know what is bad debt and what good debt is.

What do you think is bad debt?

Borrowing money for your impulse buys, using credit cards just at the drop of the hat, and so on are considered to be bad debt. The debts that worsen your financial situation and hurt your credit more are bad debts. Thus, mainly the things for which you use your credit cards, the things that you would have been able to do without are the ones that result in bad debt. Using your credit card to pay your medical bills, or may be your utility bills and so on is also bad debt. The best way to avoid incurring bad debt is lowering the usage of your credit cards.

What do you think is good debt?

You may be astonished to learn that debt can be good. But, yes debt can be good too provided you are investing your money into or for something that has some importance in your life and you may even be able to get good returns from that. For example, if you are going to invest your money in any of the investment vehicles like stock market or the forex market, in gold, or may be in the real estate market, it is your good debt. Not only this, good debt can also be the home loan that you are going to take out or the one that you had taken out in order to get your home. In addition, if you borrow money for your education purpose or may be for the education of your child, it is good debt too.

However, getting a mortgage of your home can be bad debt too if you apply for a home loan for an amount that is more than what you actually require. So, in order to stay within your limits and to avoid incurring bad debts, you can use a mortgage calculator in order to get a home loan as per your affordability. In addition, it is also important for you to always check your credit report from time to time and make on-time payments on all of your debts. Moreover, before investing your money in any kind of investment vehicle it is important for you to have a clear knowledge on the options.

About the author

Powell is a regular writer with Discussion of the day and is also a contributory writer with other financial sites. His expertise is woven around various aspects of the debt industries with topics like wage garnishment, tax liens, bill consolidation etc.

Image: jscreationzs

 

 

Hezi Hershkovitz

Networker & Social Media Expert at SuccessHowTo
Onine marketer, social media expert, and all around great guy. Hezi coachs people on internet marketing and on how to make money from home.

16 Responses to Good Debt, Bad Debt – What’s the difference?

  1. Mikejohn says:

    Hello good different things between a good debt and bad debt what you have shared through this blog post. as a matter of fact debt is a thing that is to be avoided at all costs.
    Mikejohn recently posted..Tips To Getting Best Managment PlanMy Profile

  2. Hello it is very difficult to say difference between a good debt and bad debt. I thought every debt is bad because debt is always a burden of a person. So, I am very glad to read your post about good debt and bad debt and understand the difference between them.
    Debt Management recently posted..I Need to Manage My Debts- what Can I Do?My Profile

  3. Mickal says:

    Bad Debt: It is the kind of debt that most of us are familiar with. You start out in life with a boat load of student loans, and most likely a few credit cars.

    Good Debt: This is a completely kind of debt. Good debt is commonly referred to as leverage. This refers to the fact that you are going into debt in order to make more money for yourself in the future.

  4. Well said, I enjoyed your blog btw! Everyone can easily understand your article, keep it up.
    Mitch Carson recently posted..The Gold Awaits You with Tax Lien CertificatesMy Profile

  5. Mike S says:

    Great article! Here’s my own definition of good and bad debt. A good debt is a money that spends for a profitable asset like real estate properties, house and lot, and even for starting a business. A bad debt is an abuse of money buying wants like bags, high-end cars, fashion garments, and etc.

  6. Sally says:

    Funny to think of debt as good – but when you put it like that…

    I never really think of my student loan debt as a ‘debt’ but of course it is – all debt is bad really – I just know I’ll be able to pay this back in the long run and that’s whats expected.

    It’s good to read different people’s points of view.

  7. Hi, thanks for such a good post..I really appreciated it.

  8. Renaud Gagne
    Twitter:
    says:

    Bad debt is every credit you get that doesn’t repay itself by what you bought.

    When people “invest” in a new business, it is still a bad debt until the cashflow of that purchase is paying the loan repayment on schedule.
    Renaud Gagne recently posted..How I Got Zero Percent Interest on My Credit Card DebtMy Profile

  9. Hugo Shelley
    Twitter:
    says:

    I guess debts are both, depending on how you handle them. They can be as great as a problem solver, or as worse as a big problem. It all really depends on how you handle it.

  10. Julie Mcbride
    Twitter:
    says:

    I would say that both types of debt are bad because ultimately debt is debt, however sometimes need is must and all of us don’t have the luxury of being rich and being able to afford everything we buy.

    If you do need to enter into any type of agreement that will lead you into debt, good or bad, make sure you budget for your repayments well in advance.
    Julie Mcbride recently posted..Getting Out Of Debt GuideMy Profile

  11. Serah says:

    Managing debt is becoming increasingly difficult for people.They start to use credit for their day-to-day expenses and pretty soon they are paying off debt with debt. It becomes a never-ending spiral from which it gets increasingly difficult to escape and more often than not it ends in a bad credit record. We offer our clients the option of getting credit from our company even when your record is compromised.apply for a loan today

  12. Paul Tim says:

    If there even is a term as good debt. For me, a debt is a debt. You will end up paying for it, interest included. Sure, I understand what you meant. It’s still a debt! Perhaps, a good dept is something that you can repay for a period of time without interest, then it can be considered a good debt.

  13. Different between Good debt and bad debt are really difficult.Before I don’t know about Good debt and bad debt. I am learning about this to read our post. Thanks for your post and share with us.
    sagar ahmed recently posted..JSC Result 2015My Profile

  14. David King says:

    Some good different things between a good debt and bad debt what you have shared through this article . as a matter of fact debt is a thing that is to be avoided at all costs.
    David King recently posted..DataOnline to exhibit at the GAWDA Annual Convention, Scottsdale, AZ, Oct 11th – 14th 2015My Profile

  15. If your in debt through secured or unsecured debt, one of the best solutions is debt consolidation. One the other hand you can also apply for bankruptcy.
    Joe Debt Man recently posted..How To Start A Firewood BusinessMy Profile

  16. Pascal says:

    If you are going down the debt consolidation route, then you should probably should look at a broker. They can assess your situation and provide you with advice.

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