Debt – The Good and the Bad

Most people think of debt as bad, something to be avoided. But, debt can be good or bad, for both lenders and borrowers.

Borrowers

For someone borrowing, good debt is debt that leads to increases in your net worth. This can happen in a variety of ways.  Debt can finance new investments in equipment, software, or people that enable you to save time to focus on other opportunities.  Student loans finance an education that can lead to higher earnings. Home improvement loans that will increase the value of your house and the quality of your life. Debt that helps you manage your finances, such as a consolidation loan, can also be considered good debt. It’s also good to just have some debt and pay it off timely, so you improve your credit score. This will help you be able to borrow when a future opportunity to take on good debt arises.