Is There Such a Thing As Good Debt?
No one likes to be in debt. In fact, there are entire corners of the Internet where people share their journeys toward zero debt with much the same zeal as, in other corners of the Internet, people count their days of sobriety out loud. Imagine, though, that you managed to pay off all of your debt. What would you own? There is a saying in the debt freedom subculture that, if you have no debts and you have ten dollars in your pocket, you are one of the richest people in the country, but how rich would you actually be? Your rent and utilities would still be due next month, and they aren’t cheap. You would still have to pay for groceries. You would probably still be living paycheck to paycheck, unless the money that you used to spend on debt repayment were to go straight to your savings account. It is easy to understand that, when most people get a considerable amount of money, they use it to borrow more. Is this a good idea? Can debt ever be good? For help understanding the long-term consequences of your borrowing and debt repayment decisions, contact a Plantation debt lawyer.
Taking On Good Debt Is Riskier Than It Sounds
You may have heard that good debt is debt that is tied to an asset. By this logic, car loans are good, while payday loans are bad. In fact, this is the difference between secured and unsecured debt. Debt is not inherently good because it is secured or inherently bad because it is unsecured, unless you are a creditor looking for assets to repossess.
Instead, good debt is debt that will ultimately improve your financial situation. By this logic, a mortgage is good debt because it enables you to build home equity. A car loan is good debt if it enables you to earn income as a rideshare driver or delivery driver or commute to a job to which you would not otherwise have transportation. Student loans are also good debt, because they enable you to earn a degree that increases your earning potential. Small business loans are also good debt, because they help you start or expand a business. Not all secured debts are good; financing a third car when you and your spouse each already have one is a less wise move than just keeping your money in the bank and deciding whether you need the third car when you have enough money to pay for it in full.
Of course, good debt is only good if things work out as planned; every so-called good debt is really a financial risk. You don’t know whether you will graduate or find a well-paying job after graduation, and you don’t know whether your small business will eventually become profitable.
Work With a Debt Lawyer About Good Debt
A South Florida debt lawyer can help you if you are in a bad financial situation because of ostensibly good debt. Contact Nowack & Olson, PLLC in Plantation, Florida to discuss your case.
Source:
investopedia.com/articles/pf/12/good-debt-bad-debt.asp#:~:text=Debt%20that%20helps%20put%20you,improve%20your%20overall%20financial%20picture.
