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There’s a lot of talk about good debt vs. bad debt.
Here’s a breakdown on how they work...
Here’s a breakdown on how they work...
Bad debt = consumer debt.
This is debt that’s taken out to purchase liabilities.
Example: Using a credit card to go on a shopping spree. It’s bad b/c you pay extra in interest for the things you buy & odds are, those things don’t appreciate or bring in any more money for you.
This is debt that’s taken out to purchase liabilities.
Example: Using a credit card to go on a shopping spree. It’s bad b/c you pay extra in interest for the things you buy & odds are, those things don’t appreciate or bring in any more money for you.
Good debt = commercial debt
This is debt that’s taken out to buy a cash flowing asset.
Example: You get a loan to buy a rental property that cash flows for more than the monthly payments. Property gets paid off + you make extra $.
That’s why good debt is also called Leverage.
This is debt that’s taken out to buy a cash flowing asset.
Example: You get a loan to buy a rental property that cash flows for more than the monthly payments. Property gets paid off + you make extra $.
That’s why good debt is also called Leverage.
Good debt can be a powerful tool to build wealth if used cautiously and conservatively.
Accumulating bad debt is a fast way to get stuck in the rat race.
You can pay to have debt or you can have debt pay you.
Accumulating bad debt is a fast way to get stuck in the rat race.
You can pay to have debt or you can have debt pay you.
