Advertisement

Experts discusses good debt versus bad debt

Owing money may not seem like a financial advantage, but experts said it’s all about the type of debt you’re carrying.
Published: May. 24, 2022 at 8:37 AM EDT
Email This Link
Share on Pinterest
Share on LinkedIn

InvestigateTV - Owing money may not seem like a financial advantage, but experts said it’s all about the type of debt you’re carrying.

Good debt is debt with the potential to increase your net worth. It’s having assets that don’t lose value, take your mortgage on a home. Over time, that house will likely increase in value. That’s considered good debt.

Michael Joyce with the financial firm Agili said bad debt is when something loses value quickly.

“Bad debt would be taking out credit card debt to subsidize your ongoing monthly expenses or even buying any kind of depreciating asset like a car or a boat,” Joyce explained.

If you do need to buy a big-ticket item like a car, Joyce said it’s best to have as much money as possible to put down, so you make your loan payment manageable and you don’t have to take out the loan for a long time. Basically, you don’t want to be a in a situation where your car depreciates faster than the term of your loan.

Bad debt is still important to have. We now live in a credit card over cash society, but if you do have credit cards, it’s important to pay them off in full each month or have a plan to pay that debt off as quickly as possible.