Good Debts - Are There Good Debts

Is it possible some of your debts can be considered good debts?

Of course it is. But what constitutes a good debt?

In a nutshell, a good debt will net you something when you finish paying for it whereas a bad debt is something that costs you extra.

Let's look at an example. A debt you can consider a good debt would be a house that costs you 6% interest to finance but that later would allow you to sell at a profit. This would be a good debt.

Of course that's assuming you have a mortgage payment you can afford and haven't jumped into a house that is way beyond your means.

Now this would be a good debt for other reasons as you may end up living in this house for a lifetime. But it is also good because you can live in it while you are paying for it. I mean you pay rent and have nothing to show for it in later years.

Borrowing money to go to college or university is considered a positive debt because it can result in you ending up with something very valuable. A good job with a good future.

You do pay interest but you will have an education that will boost your income and result in a higher quality of life.

Another good debt could be to borrow money that could create more money for you such as with a loan to buy investment products where the amount the investment pays is higher than the loan interest rate. This can be speculative though and definitely is not for everyone.

Borrowing money to get a tax advantage such as with certain retirement investments can also be considered a good debt.

Credit used wisely can also create a positive credit rating, which can help you qualify for good credit products down the road that can increase your wealth.

Now with the economy in the shape it is currently in, even a mortgage is a gamble. But you have to live somewhere and some sort of debt is generally a must. You just have to manage it properly.

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