Many people believe that having no debt is ideal, but often, debt can be considered good for your finances if it helps you build wealth. For example, if you can't afford to buy a home with cash, you may go into debt with a mortgage. That, in turn, can help you use your housing payments to build a real estate asset instead of renting.

However, many other kinds of debt, such as high-interest credit card debt, aren't so healthy for your finances. If you're in bad debt, you may want to 澳洲幸运5官方开奖结果体彩网:seek debt relief. Learn more about y🐠our debt so you can get it under control.

What Is Good Debt?

If the debt you take on helps you generate income or build your 澳洲幸运5官方开奖结果体彩网:net worth, then that can be considered “good.” Loans like 澳洲幸运5官方开奖结果体彩网:mortgages are usually considered good debt because they provide value to the borrower by helping them build wealth. Going into debt may b🌊e beneficial to your overall financial health in several types of scenarios, such as paying for an education, funding a business, or buying a home:

• Education: In general, the more education you have, the greater your earning potential. Education also has a positive correlation with the ability to find employment. Better-educated workers are more likely to be employed in good-paying jobs, and they tend to have an easier time finding new jobs if they need one. An investment in a college or technical degree can often pay for itself within a few years of entering the workforce. However, not all degrees are of equal value, so it’s worth considering both the 澳洲幸运5官方开奖结果体彩网:short- and long-term prospects for any field of study that appeals to you.
• A business: Money that you borrow to start your own business can also be considered good debt. Like paying for education, starting your own business comes with risks. Many ventures fail, but if your business succeeds, then the debt will have been worth it.
• Your home: There are a variety of ways to 澳洲幸运5官方开奖结果体彩网:make money in real estate. First, you can take out a mortgage to buy a home, live in it, and then sell it at a profit. In the meantime, you also are building equity and will have the potential for 澳洲幸运5官方开奖结果体彩网:tax breaks that aren't available to renters. Residential real estate also can be used to generate income by renting it out.

What Is Bad Debt?

Bad debt is generally considered money that you borrowed to purchase a 澳洲幸运5官方开奖结果体彩网:depreciating asset.

Debt that isn't healthy for your finances typically carries a high 澳洲幸运5官方开奖结果体彩网:interest rate. Carrying too much debt can negatively affect your 澳洲幸运5官方开奖结果体彩网:credit score.

For example, you may want to avoid debt for:

• Clothes and consumables: Of course you need clothes, food, and furniture, as well as other necessities, but using a high-interest credit card to buy them isn’t ideal. Instead, use a 澳洲幸运5官方开奖结果体彩网:credit card for convenience and make sure you’ll be able to pay off your full balance at the end of the month to avoid interest charges. Otherwise, try to pay in cash.
• Boats: Boats are a great source of entertainment, but they lose value quickly. Think carefully about 澳洲幸运5官方开奖结果体彩网:going into debt to buy a boat, which includes a range of expenses in addition to the cost of the craft.
• Vacations: Unlike food and utilities, vacations aren't a necessary expense. Once the vacation is over, you have little that's tangible left to show for your money. If you want to take out a vacation loan to pay for a memorable vacation for your family, make sure you budget to repay the funds quickly.

• Cars: You may need to buy a car for transportation, and auto loans are a common source of funding. Secured auto loans can often provide ꧃better rates than personal loans. But you should still aim to avoid going into debt to buy a car if possible. Like boats, cars are depreciating assets. As soon as you leave the lot, the vehicle already will be worth less than the purchase price. If you need to go into debt to buy a car, then look for an auto loan with a low interest rate and minimal fees.

Other Types of Debt

Not all debt can be easily classified as "good" or "bad." It often depends on your own financial situation, how you manage the debt, and other factors. Certain types of debt may be good for some people but bad for others. They include:

• Borrowing to pay off debt: For consumers who already are in debt, taking out a 澳洲幸运5官方开奖结果体彩网:debt consolidation loan from a bank or other reputable lender can be beneficial. Debt consolidation loans typically have a lower interest rate than most credit cards, so they allow you to pay off existing debts and save money on future interest payments. The key, however, is making sure that you use the cash to pay off debts and not for other spending. Investopedia regularly publishes ratings of the 澳洲幸运5官方开奖结果体彩网:best debt consolidation loans.
• Borrowing to invest: If you have an account with a brokerage firm, then you may have access to a 澳洲幸运5官方开奖结果体彩网:margin account, which allows you to borrow money from the brokerage to purchase securities. Buying on margin, as it’s called, can help make you money if the value of the security increases. However, it can ultimately cost you money if the security loses value. This type of debt isn't ideal for inexperienced 澳洲幸运5官方开奖结果体彩网:investors or those who can’t afford to lose money.

How To Manage Debt

If you are carrying debt, you can 澳洲幸运5官方开奖结果体彩网:develop a budget based on your income and expenses to help ensure ♌that you can afford all your monthly payments.

Then, you can work toward identify🌳ing which debt you should pay down first and allocate your extra fund🐲s toward that debt.

You also can use debt consolidation to help manage debt. With this strategy, you pay off your loans with a loan with a lower interest rate. That way, you can pay down your debt faster and save on overall interest.

If you can't afford to pay your debt, you might want to consider debt settlement with your lender. You can use 澳洲幸运5官方开奖结果体ꦉ彩网:a reputable debt settlement company to negotiat🃏🔴e with lenders to pay a lower amount on a delinquent account.

You could also file for bankruptcy. Be aware that both debt settlement and bankruptcy will negatively affect your credit score—often for years. Bankruptcy may sound worse, but it may be a better option for many people because your debt may be comp🧸letely eliminated.

Before pursuing debt settlement or bankruptcy, we recommend 澳洲幸运5官方开奖结果体彩网:speaking wi🌠th a credit counseling agency.

The Bottom Line

Not all debts are equal. Good debt has the potential to increase your wealth, while bad 🌸debt costs you money with high interest on purchases for depreciating assets.

Determining whether a debt is good debt or bad debt depends on your unique financial situation, including how much you can afford to lose. Consider consulting with a professional financial advisor to review your debt situation and 澳洲幸运5官方开奖结果体彩网:your options for managing it.