Good debt vs. bad debt

Started by Danielle B.
Followed by: @Danielle @Samuel @Sylvia @George @Maria @"Sherrie D" @Sarah @Susan @Michele @Shannon @George @Michelle @Monica @Spencer @Neosha @Sharlene
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Danielle B.

The personal example I use for good debt vs. bad debt is student loans versus credit card balance. Good debt, for me, is money that I owe that will help me build my credit score and allow lenders to see that I’m responsible with money. Bad credit, on the other hand, is something like carrying a credit card balance, where lenders can see that I could be better about spending money.

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Sylvia R.

I also see mortgage debt as that too. They see you are paying it off every month.

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Shannon H.

Good debt is anything that is going to help you increase your bottom line. That includes business loans to help build and grow your business, students loans for education that will enhance your life and income, and other similar types of debt taken on to enhance what you are working with.

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Shannon H.

I'm reading a book to determine if it may be a good fit for my 13yo nephew: Personal Finance for Teenagers and College Students by Tamsen Butler. I have checked it out from our library via the Hoopla app so I'm not out of pocket if I don't think it's the right book.

In Chapter 5: only 4 types of debt can be healthy: Student loans, Mortgages, Necessary Medical Bills (one's health always takes priority) and Business Debts.

So far it's pretty interesting and informative and one I would recommend to anyone wanting to increase their financial knowledge base.

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Danielle B.

I'm reading a book to determine if it may be a good fit for my 13yo nephew: Personal Finance for Teenagers and College Students by Tamsen Butler. I have checked it out from our library via the Hoopla app so I'm not out of pocket if I don't think it's the right book.

In Chapter 5: only 4 types of debt can be healthy: Student loans, Mortgages, Necessary Medical Bills (one's health always takes priority) and Business Debts.

So far it's pretty interesting and informative and one I would recommend to anyone wanting to increase their financial knowledge base.

Ooooh, nice! I'll have to take a look at that for myself and maybe send it to a few of my younger cousins. Thanks for the suggestion :)

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Danielle B.

Will bankruptcy cause interest rates to go up ?

If you're asking if bankruptcy will cause your interest rates (for credit cards/mortgages) to go up, then I believe so. Bankruptcy will essentially significantly decrease your credit score, which will in turn affect increase your future interest rates. For example, if you file for bankruptcy and later want to get a personal loan, the interest rate for it will more than likely be quite high.

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Spencer H.

I am of the belief that an auto loan can be a form of good debt as well, depending on your personal take on finances. If you buy a modest car (even if it's new) when it is needed (NOT buying a car every 3 years just so you have something new and exciting) and you receive favorable financing, this can be a great opportunity!

For example, you take out a $10,000 auto loan at 3.5% for 60 months:
Payment = $181.92
Total interest paid = $915.05
If you invest that money at 5% (a conservative return) for that same 60 months:
Ending balance = $12,833.59
That's $1,918.54 more earned in interest than you paid!

Of course, everyone places different value on living debt-free, and if you are one who stresses about debt, it is likely worth more than the savings over time to have zero debt now!

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