What is Good Debt?
Thousands of Americans are struggling with their debt and are trying to get rid of it. However, some debt is not that bad. Some of it is actually considered to be “good”.
So what is good debt?
Good debt is generally the investment debt. Debt which creates value. A good example of a good debt will be a student loan. Yes you are taking a loan and you are going to be in debt, but you are investing in your future and in your education and hopefully your education is going to help you earn much more money later.
Another example of good debt will be a business loan. If you are borrowing money in order to make more money, it qualifies as a good debt.
Mortgage is a good debt as well, because mortgages tens to have lower interest rates and are tax deductible. You are probably not going to make money by investing in your home, but since you need a place to live, you don’t have a choice.
Pretty much every debt which is tax deductible is good debt.
Remember though that debt is still a debt and your credit report does not distinguish between good or bad debt. You still have to pay it off and while it is better to pay off your bad debt first, you shouldn’t procrastinate and start paying off your good debt as well.
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