In the United States, it is said that there is hardly anybody who does not have any debt. Personal debt is increasing in leaps and bounds. One can easily get a credit card with a tempting discount. Initially credit card issuers used to chose customers who are sound customers capable of repaying their debts. These days the same issuers are looking for customers who will be slow in repayment so that the issuer can charge them heavy interest rate and reap a stupendous amount annually.
But, debt cannot be termed as totally bad . Debt if properly managed and handled can turn good also and can be beneficial in building wealth and security. Experts in these line opines that it all matters what you buy in lieu of the debt taken. When you buy something, the value of which goes down, it is certainly a bad debt. But, if it is reverse, the debt is good. Saying that a good debt produces money and bad debt costs money can easily sum it up. Debt for buying a home that gains equity and increases in value is a good debt. Mortgage provides tax advantage and write-off of interests. It is certainly is a plus in buying a home. It is not only a shelter, the value perpetually increases and gives one a sure way to get his money's worth.
Many advisers are unanimous in saying that debts that are tax deductible and debts that increases your wealth are good debts. Examples like buying a home or refinancing to get rid of excessive debts are a good use of credit. Similarly, debts for buying high return stocks, bonds or similar investments are worth taking.Let us summarize some of the good debts :
Student Loans:
These type of loan comes on the top of the good debts loan. These are always a wise investment with low interest rate and high rate of return since most college graduates normally earn over a million dollars in their lifetime. Further, education is always priceless, taking a debt for the education is never a mistake. Some people think it is advisable to take government loan first and then low interest private loans , next to take scholarships and grants if available and lastly go for student loans.
Mortgage Loans:
Investment in a home or property is good by taking a debt for doing so. The value of property rises over the years so even with interest on your home loan can still fetch back your money with little extra. But one point to note, one should not be lured to take long term home loans which makes you pay so to say 'interest only' payments on your home loan since it merely holding off paying the principal amount of the loan which is the larger chunk off the debt .
Employees Stock Purchase Plans
Some companies offer their employees discounted stock options investment plans. This is also to be termed as a good debt because the company is offering money up front as a loan to the employee to buy stocks at a discount. The employee pay interest interest fee a monthly amount towards the debt while contribute additional amount to help stock fund grow. Also, some may go for traditional investment plan where a set amount is deducted from paycheck and invested for the purchase of stocks which gives them a good return in due course at an opportune time.
