| Debt takes on a very negative connotation in today's | | | | and, if consumers are diligent and pay their entire |
| financial parlance. Words like "subprime," "credit crunch" | | | | balance every month, they too can help build a good |
| and "recession" assail viewers every time they turn on | | | | credit score. But credit card debt becomes bad debt |
| the broadcast news. Recently, the Federal Reserve | | | | when the consumer carries a balance for an extended |
| cut interest rates to help an economy struggling with | | | | period, abuses the card, misses payments or pays late. |
| debt. But not all debt is bad. This article highlights | | | | This will negatively affect credit scores and make it |
| differences between good and bad debt, along with | | | | much more difficult to acquire good debt in the future. |
| offering several debt-relief options for those in financial | | | | Other examples of bad debt are payday loans and |
| trouble. | | | | pawnshop loans. These debts carry ludicrous terms, |
| Good Debt | | | | with interest rates often two or three times as high as |
| Good debt is secured with a valuable asset, like a | | | | credit cards. These debts are bad because they don't |
| home mortgage or, perhaps, a car loan, and can be | | | | offer the consumer long-term financial help. These bad |
| considered an investment. Home loans are good | | | | debts are a quick financial fix and should be avoided at |
| because over time a home's value increases. Student | | | | all costs. |
| loans are also considered good debt because they | | | | Debt Relief Options |
| are also like an investment. Students who graduate | | | | Help is available for the consumer tangled in bad debt. |
| with a college degree earn, on average, higher | | | | It is not easy to recover from a desperate financial |
| incomes than those that don't. | | | | situation, but it can be done with some discipline, |
| Home loans and college loans are good for another | | | | patience and hard work. |
| reason: they usually have very agreeable terms. Both | | | | Debt consolidation is a useful option for consumers |
| types of loans come with very low interest rates, and | | | | with large low-interest debts, like home mortgages. By |
| borrowers repay the debt over a long period. The | | | | moving their high-interest credit card debt into a home |
| typical home loan, for instance, carries a 30-year term. | | | | mortgage, consumers save a bundle on interest |
| The interest on college loans is so affordable that the | | | | payments. The only caveat to this method is that |
| graduate can repay their loans slowly over a long | | | | consumers should be wary of borrowing too much |
| period as they gradually earn more money and build | | | | against their home's value, which will extend their loan |
| their personal wealth. | | | | and make it more difficult to pay back. |
| Therefore, good debt helps borrowers by increasing | | | | Debt settlement is a great option for consumers who |
| their wealth and by building a healthy credit history. | | | | have high-interest credit card debt. This involves |
| Borrowers who repay their debt diligently earn a good | | | | negotiating with your creditors to cancel a portion of |
| credit score and become eligible to borrow more good | | | | your debt - sometimes by as much as 60 percent. |
| debt in the future. | | | | Unfortunately, debt settlement is only available to |
| Bad Debt | | | | consumers who are having a difficult time paying their |
| Bad debt is any debt that either has unfavorable terms | | | | minimum payments every month. Generally, |
| like some credit cards or is blatantly wasteful and | | | | consumers with less than several thousand dollars in |
| expensive. Some credit cards have favorable terms | | | | debt will not qualify for debt settlement. |