Debt is a four-letter word to many people. It’s become the primary source of stress for a growing number of consumers. But unless you’re independently rich, debt can be quite a necessity if you wish to make a major purchase such as a home or an automobile.

Consumer debt is booming, and so are delinquencies. Increasingly more consumers are turning to credit counseling to get their debt under control. And even with the tighter restrictions on bankruptcy, people are still filing. These statistics paint a grim picture of debt, yet consumers are still using their credit cards and taking out loans.

The truth is that debt is not such a bad thing in and of itself. It can help us in getting the things we need and want. The problem lies in accumulating too much debt. If we’re not careful, we can get in over our heads. And once we do, it becomes harder and harder to get rid of debt.

By learning about debt and understanding what is an acceptable level of debt based on our income, we can steer clear of the debt trap all together. And if we’re already in too much debt, there are steps we can take to reduce it.

Good Debt vs. Bad Debt

Yes, there is such a thing as good debt. There’s only a few forms of debt have this distinction, but you need to know the difference. Some examples of good debt are:

Debt incurred to buy a home – Owning your own house has numerous benefits. Because your home is also an investment, it’s considered a good debt. It gains value instead of losing it, so you’re putting yourself at an advantage by going into debt if you keep your payments current.

Student Loans- Having a college education can be a great investment because it allows you the opportunity to earn substantially more during your career. It’s possible to re-coop the cost of college many times over.

Business Loan - though starting a business can be a high risk venture, the rewards in the form of profits can be substantial. However, a few of the assets you purchase will depreciate rather than appreciating. But for practical purposes, you can consider this a good debt.

There are numerous examples of bad debt. Below are a few:

Auto loans – Having a car is a necessity for many, but a car loan is still considered bad debt. An automobile loses value over time rather than gaining it, so when it’s time to sell or trade you won’t recover your investment.

Credit Card Debt – In general credit card purchases are considered bad debt. Although some items we purchase could appreciate, the vast majority of items we buy with credit cards lose value.

Personal Loans - Most personal loans are taken out on high tickets items such as furniture, appliances, or even vacations. These are often things we need, and a vacation can even help us become more productive, allowing us to potentially earn more. But none of these things appreciate in value, so they are considered bad debt.

Just because a debt is a so-called good debt, that doesn’t mean it can’t get us into trouble. It’s vital to keep our good debt at a manageable level. Lenders take our income into consideration when lending us money because of this. But it’s also crucial that we look at our individual situations and not borrow more than we can comfortably pay back.

On the flip side of the coin, bad debt is not necessarily taboo. There’s no harm in taking on some bad debt to get the things we need and want. But the smart move to make is keep it to a minimum, only using it for things we really need.

Have you run out of options? Want to be free of debt in the next 12-36 months? These Debt Help Services can enable you to become debt free. Learn how at www.HelpWith-Debt.info.

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