What Is So Good About ‘Good Debt’?
When most people think about debt, they more often that not think of it as being a bad thing; and for the most part it is. There are some debts however that can be considered good since they are for the betterment of a person or as an investment.
Before the economic meltdown, one of the best debts you could ever have is a mortgage. Owning a home is considered an investment as oftentimes your home will increase in value instead of decrease. If you decide to sell it, you will most likely get more out of it than you paid into it. Also interest on mortgages is tax deductible.
While a lot of people are suffering financially now due to unrealistic mortgages and property prices, buying a house on a mortgage is generally still consider to be a good debt from the long run prospective.
Starting a business is another form of good debt, especially where the opportunity for profit is seen to be high. This will allow you to pay off that debt quite quickly.
High return stocks and bonds are considered good debt as well. If you invest wisely and are certain of getting a high return on your investment, going into debt to invest might be a good idea. Knowing the stock market is needed here or at least someone who can give you good advice on what to put your money into.
Going into debt to educate yourself is really an investment in your future. It will increase your earning potential in the years ahead allowing you to pay back any debts.
If your company has an employee stock plan, this can be a good use of debt as you will often be sold these shares at a discounted price.
It might also be possible to have deductions from your paychecks to pay for the loan for these shares.
No debt is good debt if you can’t meet the payments. If you are sure you can pay back the loans, there are some really effective ways to use the ability to borrow money.
