Many of you may be saying what is good debt and what is bad debt? Well let’s start with debt. According to Webster’s dictionary, debt is “something that is owed or that one is bound to pay to or perform for another or a liability or obligation to pay or render something.”
Is debt really good, no it’s not but the term “good debt” will be used here for illustration purposes. Good debt is anything that you can’t afford to pay for up front but have the money to pay for on a schedule such as a mortgage or home equity loan. Bad debt is anything that you can’t afford to pay for up front, that is usually something you want instead of something you need, or you can’t or didn’t save up the money to pay for it so you apply for a loan or charge it.
The most common form of bad debt is a credit card. Credit cards should be used with discipline. The best way to establish and maintain good credit is to purchase something with a credit card and then pay off the balance when the bill arrives. This shows the credit card company that you pay your debts on time and are a responsible shopper. Other examples of bad debt...
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