Prime Rate Credit

I always thought it funny when I’d hear financial wizzes and others that thought they knew a lot about finances say there is a difference between debts. I always thought all debt was “bad”, but apparently there’s been a line drawn and there is such a thing as good debt and bad debt, and true enough, one kind of debt is a much better debt to be in, but I still always thought, wouldn’t “no debt” be the best for everyone involved?

Well, yes, of course, we all know that not being in any debt would seemingly be a God send to our lives and allow us to live in peace and ever lasting harmony with the world, but even being in no debt at all can have it’s pitfalls when it comes to lenders taking on your risk if you want to buy something large. If you’re a millionaire, sure, you may be able to buy things outright, but even most millionaires incur and maintain some kind of debt. Whether it’s a mortgage, or a loan to build something, or loans to buy other things, good debt and bad debt exists no matter what part of the income sector you consider yourself to be a part of.

Good debt can be things like school loans, mortgage loans, and loans to build homes and add on to your home. Good debt is basically a debt that’s typically not revolving debt, like with credit cards and other lines of credit, and is, in some way, going to pay you back. For example, school loans are low interest, and your payback is a good education, more marketability as an employee, and most likely higher pay in the jobs you will end up seeking.

For mortgages, pay back is the fact that homes usually appreciate in value, and properties usually appreciate as well, making it a “good investment”. Also, mortgage loans are usually considered fairly low interest, and also the mortgage interest is tax deductible. Sure, you pay all your interest up front, but you’re getting something in return in the end.

Credit card debt is the biggest no no in debt these days, and usually credit card debt, which is revolving, is higher interest, and is used to buy things that don’t appreciate in value, nor do they really “pay you back”, unless you’re using them to start a business, and this is really your only means of financing certain things to start that business. How much good and bad debt do you think you have, and can you label all of your debt? Hmm….