Used strategically, debt can help you do things you possibly otherwise couldn’t – like buying a car or house.
What is “good” debt? “Good” debt generally has lower interest rates - people tend to take it on for purchases that have the potential to grow in value or may increase your earning power. “Bad” debt generally has higher interest rates or pays for things that tend to lose value after purchase. It can also be debt that you struggle to pay back.
What should you know?
A house mortgage, which you pay back over a set period of time, is called installment debt – while credit cards and online/mobile loans are called revolving debt.
Installment debt is generally considered to be healthier than revolving debt.
The difference between “good” and “bad” debt isn’t so much the form of debt, but how you use it. The worst kind of debt is the kind you can’t pay back.
