Not ALL debt is bad debt

Big purchases like homes, cars, and even college educations often require more money upfront than most of us have on hand. That’s where loans come in: mortgages, auto loans, and student loans allow you to borrow the money and repay it over time.

However, just because one of these loans is available doesn’t mean it’s always a good option. Here’s why:

Interest rates: You’ll end up paying more than the sticker price because of interest. Consider the interest rate on the loan and how much it adds to the total cost.

Budget impact: Factor in the monthly payments. Can you comfortably afford them for the entire loan term, even if your expenses change?

Alternatives: Could waiting until you can afford a bigger down payment, or looking at a more affordable used car be a better fit?

Here’s a short explanation of the difference between how much you qualify for and how much you can afford. And here’s how “secured” loans like mortgages and auto loans work.