Good Debt vs. Bad Debt
All debts are not created equal. Some forms of debt are good while others are bad. In this blog entry, we’ll discuss the differences between the two and provide a few examples.
Good Debt at a Glance
Simply put, good debt is a form of investment that creates value. Student loans, home mortgages, business loans and investments are examples of debt that will help you generate income and improve your overall net worth. For example, education has long been viewed as a ticket to higher-paying jobs, generating possibly hundreds of thousands of dollars over the course of a lifetime. A home mortgage falls into the good debt column because the house is a tangible thing that can later be sold – hopefully for a profit.
Bad Debt at a Glance
If what you purchase is not going to appreciate in value, it’s considered bad debt. By definition, this includes automobile loans. While for many, a vehicle is an absolute necessity, it has already decreased in value the moment you drove it off the lot. Other examples of bad credit include:
- Credit card debt – the average U.S. household currently carries about $15,700 in credit card debt
- Cloths
- Vacations
- Groceries
- Fast food
Attack the Bad Debt
When mapping out a strategy to attack or pay down your debt, you should train your crosshairs sharply on the bad debt first. While it can be tempting to double up on your mortgage payment if you have a bit of extra money, avoid the temptation and go straight for the debt with the highest interest. Another option that many use is a debt-consolidation loan. You can even try contacting your credit card company and asking them to lower your interest rate.
Bankruptcy an Option? The Oswalt Law Group in Arizona Can Help!
If crushing debt is keeping you up at night, bankruptcy may be a very good option for you. In fact, bankruptcy can go a long ways toward keeping the debtors at bay while buying you a bit more time in paying down your debt. To talk more about bankruptcy in Arizona, we invite you to contact us here at Oswalt Law Group for a free consultation. Our number is (602) 225-2222.