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The differences between good debt and bad debt

Personal debt is something that we all struggle with. When you are a single dad (father) will take all of the debt advice you can. It doesn’t help at all that personal debt in America is continuing to grow add at a record pace. Part of the reason for the increase lately is because the credit card companies have become less selective and have eased their qualification rules so it is now easier than ever to get credit. It’s also now easier to get into debt because of this.

Debt is a very complicated notion to deal with. One thing that makes it very complex is that not all of the debt that you can accrue is bad. In the same token not all of it is bad. If you can understand the way to treat your debt wisely you can turn your debt into something that will allow you to build up some cash.

One way to help demystify your navigating through your debt is to understand there is a difference between good debt and bad debt. A lot of the differences seem sensible but, these differences are more often overlooked by most people is this country.

Good debt is defined as any debt that has the abilty to create some value for you. Some examples of this are a home loan, business loan, and school loans to name a few. Also any debt that is tax deductable can be considered good debt. If you have debt on a credit card that has 17% interest and then take that debt and turn it into a 6% home equity loan that is turning bad debt into good.

Bad debt is defined as purchasing disposable goods or any type of item that does not increase in value and using a high interest credit card for the purchase and not paying off the balance immediately. Remember that when you charge something on a credit card and do not pay the balance in full you will end up getting charged interest on the purchase and you will pay more for the item in the long run. Examples of these are any type of store credit card. Bigger store will offer credit cards at their stores and promise that you will receive a certain percent discount on your purchase just for signing up. Do not fall into this trap because the interest rates that they charge for these cards will off-set any savings you thought you might have just earned for signing up.
So as a quick reference here are some examples in a bulleted format;

Good Debt:
• School Loan
• Business Loan
• Home Loan
• Mortgage

Bad Debt:
• High Interest Credit Cards
• Any type of Store credit card
• Auto Loans

In closing, debt is something that most people have to deal with on a regular basis. Single dads (fathers) looking for financial help will have to understand what type of debt they have before that can even go looking for help. Understanding that there is a difference between good debt and bad debt can help you understand that you are probably going to have some debt but, it is all not bad. Hopefully, this article will help you on your way.

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