Good debt vs. bad debt

Started by Deleted user
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Deleted user

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.

Deleted user

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 :)

Deleted user

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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Sara M.

I would like to know how to live in debt free life.

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Gracy D.

Goal to live debt free is great. I think it starts with gaining knowledge. What are my resources? What are my needs? What are my wants? How can I live within my means? Half of the battle is won with just the knowledge rest is exercising responsibility.

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Sherry P.

What impact can divorce have on your credit rating? What is the role of 'shared debt" such as a mortgage?

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Melissa D.

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.

We took out a car loan at 2% taken out after the financial crash. It worked out great for us because it freed up money to pay down our 6.55% student loans. There are definitely ways to work an auto loan to your advantage, especially when interest rates are low.

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Michelle S.

Auto loans are good as long as you Never miss or be late with a payment -

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Pearlie B.

Hope All Is Well to me there's no difference in debt (debt) is debt REGUARDLESS at the end if the day when all this is over I speak for me no matter what the debt is still gonna be there we all have our own journey doing this time Seriously everyone stay safe and positive

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Maria D.

I would like to know how to live in debt free life.

Me too!

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Abigail S.

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.

Thank you for the book recommendation!

M

Melissa D.

Classically, good debt was taken for things that will increase in value (home, education) and bad was for stuff that will decrease in value (cars and other physical goods mostly).

But watch out! Traditional divisions are breaking down and formerly good debt categories can sometimes be bad. For example, since 2008 there's been a growing awareness that student loans often don't have a financial payoff they need to in order to cover payments and be "good debt."

Deleted user

Read Rich Dad Poor Dad for some great examples of Good Debt and Bad Debt.

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