Most people think of debt as something you want to avoid, but is this always the case? Today we want to talk about the difference between good debt and bad debt.

The main question you should ask yourself is, “Does this debt pay for itself?” If the answer is yes, then it’s good debt. Most consumer loans, such as credit cards, car payments, and payday loans, are what we would consider bad debt because they do not pay for themselves. A trickier example is student loan debt. If the education nets you a high-paying job, then it could be considered good debt. However, this is not always the case.

"People think you need a ton of money to invest in real estate, but that's not necessarily true."

Most financial experts would consider home loans to be good debt because you replace what you would pay for rent with your mortgage. Using this measurement, a loan to buy an investment property would be considered one of the best types of debt you can have. People think you need a ton of money to invest in real estate, but that's not necessarily true. Since whatever loan you take out for an investment property nets passive income, it is easily considered good debt.

We highly recommend moving away from bad debt and toward good debt. If you or anyone you know wants to know more about how you can use good debts to invest, please reach out to us. We are always willing to help.