Good Debt vs. Bad Debt

You have probably heard of “good” and “bad” debt, but not everyone knows the difference. Is a credit card good or bad debt? What about payday loans? What is the difference with installment loans?

Quite simply, good debt is debt that works in your favor, while bad debt can spiral out of control. Anything that can help improve your financial position over time is considered good debt. For example, a mortgage is a debt that provides a great benefit at the end and is therefore good debt.

When used sensibly, a credit card can be good debt – but it can easily get out of hand and is usually considered bad debt. Payday loans are usually bad debt, with high interest rates and unhelpful terms.

However, you might be experiencing a difficult time financially and you are considering using a loan. There could be a large bill that needs paying, an unexpected repair, or there is an expensive item that you really want. Or perhaps, life has “just happened” and you need a helping hand. A quick cash boost would help to solve the problem.

Many people consider installment loans to be less desirable than other types of finance, but there are certain benefits. Installment loans are not the same as payday loans and can, in fact, be considered good debt. With some types of loan, you will pay back far more than you borrow, and the terms are heavily weighted against you – this simply is not the case with installment loans.

Perhaps you are in a situation where you need to rebuild your credit. Installment loans can help with this process as regular payments are recorded and will get you back on track.

Aside from the simple application process, installment loans are tailored to your individual needs. They are designed to be affordable and can be paid over a flexible period that suits your situation. With the added benefit of rebuilding your credit, installment loans can help you when you need it the most.

In short, good debt helps you build your credit rating, whereas bad debt can affect your credit negatively. Choosing the right kind of debt to use can have implications for months or years to come, so it is always advantageous to choose forms of debt that will provide benefits to you in the end.

Always consider how any form of debt will affect you in the long term. 

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