The Difference in Good Debt and Bad Debt

The American population is now associated with debt around the world. From the government to individual consumers, debt is quickly consuming this country. However, there is hope. Savvy consumers are quickly learning the proper way to handle debt. Also, understanding the difference between good debt and bad debt can help you overcome the reputation that this country has gained.

In the past credit card companies were only interested in consumers who could repay their debt. However, now they are reliant on reeling in those who continually overspend which essentially makes them more money. This is bad news for consumers, who will continue to use this credit and continue to dig their financial whole. This is a classic example of bad debt.

Good debt, on the other hand, will produce cash flow. For example, investing in real estate that will eventually produce you revenue and deductions is the perfect example of good debt. Mortgages are good debt, as well. While you are borrowing money for these expenses, you are also receiving a tax advantage, as well as a place to live.

The fact is that most American’s have a boatload of bad debt. This is when you use borrowed money for disposable items, such as groceries, clothes or other daily expenditures. This will return no cash to pay off the debt, which leaves you having to find the funds to pay it. Because most American’s live beyond their means, this causes a huge problem and adds to the national crisis that is plaguing the American consumer.

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