How To Tell Whether A Debt Is "Bad" Or "Good"

While most types of debt will financially hobble you and should be eliminated as soon as possible, other varieties can enrich you. Those who distinguish between the effects of debts and tune their financial plans toward paying down the most destructive types will sit the prettiest.

Credit.com notes that context is everything when it comes to sorting through “good” and “bad” debts. Addressing credit cards, the writer reasons that using them to handle necessities or emergencies at reasonable rates would constitute good debt, while getting stuck in an endless cycle of using the cards to sustain an inflated standard of living is bad.

Mortgages, which many people automatically categorize as “good” due to tax benefits, can hurt you if you’re underwater or your monthly payment strangles away too much of your income. If your payment is comparable to what you’d be paying for rent and allows you to sock away extra income, you can classify it as good.

Check out the source link for more comparisons of good vs. bad debt.

Good Debt Versus Bad Debt [Credit.com]

(Thanks, Natalia!)