What Is Good Debt?
By: United Benefit Partners
While most people consider debt to be a bad thing, we are here to explain how debt can be good for you. However, we won’t advise you to go on a shopping spree and owe money to loan sharks. Instead, there are many ways you can accrue debt that’s good for your future. So, let’s get started.
What Is Good Debt?
Good debt is an investment you make for your future. This kind of debt can secure a financially stable future and help you with your college degree. Are you getting a hint of what we are talking about? Moreover, a good debt means you have devised a plan that will help you and your family towards a financially stable life – But how is debt going to help me become rich?
Good debt has a clear and specific reason and a strategic plan to pay it back. A person with good debt has discovered the cheapest possible way to accumulate money and secure their future. They might have accomplished this by finding the affordable borrowing methods with the lowest interest rate and long-term financing that doesn’t break into your monthly budget. To better understand the concept of good debt, we have broken it down into 4 types.
There Are 4 Types Of Good Debt
Here are 4 types of good debts that prove how taking money might make you better off in the long run.
1. Student Loan
You won’t progress in your career and make good money without a student loan. Those who quote Mark Zuckerberg should know that even he finally received a degree from Harvard. Although his financial career kicked-off through Facebook, that’s a one-in-a-million thing. Moreover, student loans can be paid off if you can budget your savings. With a college degree, you can secure a robust position, a hefty salary, and a good working environment to grow your financial position.
To live a happy life, you need a roof over your head. The rising prices of American real-estate have made it nearly impossible to buy a house without taking loans. A mortgage is good debt because you invest in a property you can claim and sell for higher profits.
3. Investing in Your Business
Most people say that business requires time, not money, but at one point, money is necessary. After all, is there any other way of keeping your business alive without adequate funding? Applying for a business loan is considered good debt because you can return the money and make a substantial profit.
4. Buying a Car You Can Afford
Keep in mind, buying a car might be a bad debt, but accruing the one you can afford is the right decision. By affording a car, we mean paying for its maintenance, fuel, and insurance cost. Knowing that you can afford to keep a car might encourage you to buy a Tesla. However, hold off on spending too much money just so you can avoid paying for gas.
Not all debts are bad. The ones that leave a long-term negative impact on your monthly budget and rob you of your freedom are financial traps. Smart people always invest their money where they see high returns. So, good debt can be summarized as debt you can return on time and profit from it.