Debt, it’s not ALL bad!

Last week we talked about just how expensive debt can be, but not all debt is bad debt. Most people couldn’t buy a house if they had to come up with the entire purchase price at once – so we have mortgages that allow you to borrow and pay it back over time. Going to college can lead to better jobs and more income later – so a student loan can be a good decision. Even buying a car can require more cash than most people are able to come up with at once – so an auto loan can mean the difference between being able to afford transportation and not.

Just because these are sometimes good decisions doesn’t mean they are ALWAYS good decisions. You need to consider the interest rates you’re being charged, how the monthly payments will fit into your budget in years to come, and what the alternatives are. A brand new car that requires a loan with high monthly payments is tempting, but a cheaper, used car may be a better choice for you.

We have a few short articles to help you tell the difference between good debt and bad debt. Here’s one on the difference between how big a loan you qualify for and how much you can afford (they’re not the same.) And here’s some more information on how “secured” loans like mortgages and auto loans work.