South Carolina Real Estate Blog
Good Debt Vs Bad DebtPosted By: Tripp Davis
Category: Real Estate Services | August 31, 2011 03:08:45 pm
According to Tripp Davis, Senior Mortgage Consultant with New American Mortgage, when used intelligently, debt can be of tremendous assistance in building wealth. The challenge is learning how to judge which debt makes sense and which does not and then wisely managing the money you do borrow. One of the secrets, therefore, to being smart with your money is to differentiate between good debt and bad debt.
Good debt is investment debt that creates value, for example, home mortgages, student loans, and business loans. Good debt includes buying a home or refinancing a home to get rid of excessively high rates.
Bad debt includes debt youve taken on for things you dont need and cant afford. The worst form of bad debt is credit card debt, since it usually carries the highest interest rates not to mention what that debt could potentially do to your credit rating. Total personal debt should not exceed 36 percent of your total income, says Tripp. Keeping the debt to income ratio in mind, its also important not to miss payments. Missed payments are trouble, he says.
The BEST debt! The best type of debt is debt that builds wealth over the long run, and the Number 1 example of that is mortgage debt. So when you borrow to buy a home, chances are thats good debt and youll build value!
Tripp heavily promotes the idea of homeownership, saying that everyone needs to own where they live and the fastest way to wealth in
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