What Are The Different Good and Bad Types Of Debt?

Not all debt is equal; there is good debt and bad debt. If you are a debtor, debt is good if it will help you accumulate wealth in the future. Good debt is something that you will make money from over time such as home loans, student debt, or borrowing to expand your business.

Just by regularly paying down your debt you can benefit. That’s because you build up a good track record in your credit file, making it easier to borrow when you need ‘good debt’ in the future. A good record may also mean you benefit from lower interest rates, or at least avoid higher ones.

Bad debt, on the other hand, is lost money. Debt is bad when you’re borrowing unnecessarily for goods or services that won’t help you financially in the future. It usually means you’re living beyond your means and falling behind financially.