Good Debt vs. Bad Debt
01.Not All Debt is Equal
Is borrowing money always bad? Not necessarily! Financial planners split debt into two categories: good debt and bad debt. Good debt is borrowing money to buy something that will help you earn more money or increase in value in the future.
02.Good Debt Examples
A mortgage to buy a home is usually good debt because homes often grow in value over time. A student loan to pay for college is good debt because it helps you get a better job with a higher paycheck. These are investments in your future!
03.Bad Debt Pitfalls
Bad debt is borrowing money to buy things that lose value quickly or that you don't really need. Using a credit card to buy expensive clothes, toys, or vacations that you can't afford is bad debt. It costs you interest fees and leaves you with nothing of lasting value.