Good Debt - Does It Even Exist?

When we think of the word debt, we don't usually get a warm fuzzy feeling, but there are certain types of debt which are better than others.

Before the economic meltdown, one of the best debts you could ever have is a mortgage. Owning a home is considered an investment as oftentimes your home will increase in value instead of decrease. If you decide to sell it, you will most likely get more out of it than you paid into it. Also interest on mortgages is tax deductible.

While there are many people suffering financially as a result of the plunge of the property market, from a long term point of view, it should still be looked upon as a good debt.

Starting a business is another form of good debt, especially where the opportunity for profit is seen to be high. This will allow you to pay off that debt quite quickly.

High return stocks and bonds are considered good debt as well. If you invest wisely and are certain of getting a high return on your investment, going into debt to invest might be a good idea. Knowing the stock market is needed here or at least someone who can give you good advice on what to put your money into.

Education is another wise investment as it increases your earning potential by attending university or college. Federal student loans have lower interest rates so in the end you will pay back less than with conventional loans.

Employee stock purchase plans are considered good debt too. Some companies offer stock options at a discounted rate. Giving loans to buy the stocks at a lower cost; the employee pays an interest fee in a monthly payment to the debt, as well as contributing to the stock.

It might also be possible to have deductions from your paychecks to pay for the loan for these shares.

With any debt, be careful and wise on paying it back. Good debt can help you in the long run, but it's easy to get into trouble if you over step your financial situation.


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Jared Wright is the marketing manager of Clivir.com - A free learning community site where you can learn more about debt relief. You can follow the links to find more related articles such as what is debt consolidation and credit card debt negotiation.