any of you may be saying credit is to purchase something
what is good debt and what with a credit card and then pay
is bad debt? Well let's off the balance when the bill
start with debt. According to arrives. This shows the credit
Webster's dictionary, debt is card company that you pay your
"something that is owed or that debts on time and are a
one is bound to pay to or perform responsible shopper. Other
for another or a liability or examples of bad debt are cars and
obligation to pay or render personal loans. I know you are
something." saying, "But I need a car!" Yes,
Is debt really good, no it's not a lot of us need a car to get
but the term "good debt" will be around but you don't have to buy
used here for illustration a new car. The value of a car
purposes. Good debt is anything starts to depreciate as soon as
that you can't afford to pay for you sign the paperwork. It is
up front but have the money to better to buy a used car and
pay for on a schedule such as a finance it for one or two years
mortgage or home equity loan. Bad or save money to buy the used car
debt is anything that you can't in cash.
afford to pay for up front, that
Examples of good debt are a
is usually something you want mortgage and business loans. Some
instead of something you need, or other financial experts may
you can't or didn't save up the disagree and include car loans
money to pay for it so you apply with this, but I believe anything
for a loan or charge it.
that you can borrow against and
The most common form of bad that has a monetary value is a
debt is a credit card. Credit good debt. The value of a car
cards should be used with only decreases, so although the
discipline. The best way to car has a monetary value, that
establish and maintain good value is less than the original
price paid for the car. An value decreases over time. Good
exception to the above statement debt has value and has the
is student loans. Student loans ability to increase in value over
are a good debt because the end time. Keep in mind at any time a
result is furthering your good debt can turn into a bad
education which results in a debt if you miss a payment or if
higher paying job (monetary you are living above your means.
value). Your debt-to-income ratio should
The money from that job can be be between 28% and 36%. If you
used to pay off your student debt-to-income ratio is above 36%
loans. Some of you may say I can then you need to do a financial
borrow against my credit card to health check and see how to cut
get a cash advance; but it is expenses, reduce interest rates,
still a bad debt because you and increase the amount sent to
didn't have the cash up front and pay for your monthly debt
you will be charged a higher payments.
interest rate and fee to get the
cash advance. Also, the value of
cash does not increase unless it
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About the Author:
Harrine Freeman is the CEO of H.E. Freeman Enterprises, a credit repair and personal finance services company and author of "How to Get Out of Debt: Get an "A" Credit Rating for Free." Visit H.E. Freeman Enterprises
