Is Debt Really That Bad?

Oftentimes, debt is perceived as a negative thing. However, debt isn’t always that bad. There are some kinds of debt that can be considered as good. In this article, you will find out more about these debts.

Debt can be catergorized into two— the good debt and the bad debt. Let us define the two.

So, what is good debt and bad debt?

Good debt is described as money due for items that can contribute to wealth accumulation or income growth over time, such as business loans, mortgage loans, or student loans. The term bad debt refers to items such as credit cards or other consumer debt that contribute nothing to your financial well-being. These are usually appropriated for something luxurious rather than a need or commodity.

What are the kinds of debt that can be considered as good debt?

• Business Loan

There are many businessmen who are able to achieve business success with debt as their source of capital. When the business will run smoothly and accordingly, the debt will significantly enhance the income and productivity of such a business. Eventually, the business will have enough money to pay the obligation associated with the business loan. Moreover, businesses often have no significant cash or liquid assets for business expansion. In these instances, business loans are also quite helpful.

• Student Loans

If you’re a student and don’t have enough money to sustain your education, then you can opt for student loans so that you can receive a good education. When you have a good education, there is more chance for you to have a good paying career. You should borrow as little as you need, live within your means and go to a university and earn a degree where there’s a certainty in such a way that you will be able to pay the student loan.

• Mortgage Loans

Most people who have an average paying job usually don’t have enough savings to purchase a house. Opting for a mortgage for a house could be a great investment. However, only buy a house that you can afford to pay in the long run. You should settle into a house with basic features. House mortgage can become bad if the person applying for it decides to buy a luxurious house which is not usually within their budget.

All other debts other than these are pretty much all the debts that you don’t need

My conclusion

Debt isn't always a negative thing, since it enables you to reap the benefits of other people's hard work while repaying them. As long as you don't purchase more than you can afford, you'll be able to save a lot of money.

There's no stress like crushing debt, and purchasing less than you can afford may keep you out of a lot of the financial binds that afflict our society today.

@Photos are from pixabay