Call Now!
Call Us 414-326-9231 608-260-7133 Text Us 414-326-4709

What is the difference between good debt and bad debt?

It’s certainly easy to rack up debt these days with the prevalence of credit cards and other lending companies that are willing to borrow you money so long as you pay it back with interest.

With that said, not all debt is considered bad. For example, it is better to have some debt in order to keep cash reserves on hand in case of an emergency. It is also possible to make your money "work harder for you" by taking on debt, in some situations.

However, not all debt is created equal. In other words, there are certain types of debt that make financial sense for your situation and other types of debt that only make your financial situation worse.

As CNN Money explains, good debt is debt that you take on to pay for things that you need but cannot pay for without wiping out your cash reserves or investment accounts. It is debt for which you can afford the monthly payments, and it comes with a reasonably interest rate.

An example of a “good” debt may be a home mortgage, so long as you can afford the monthly payments.

Bad debt, on the other hand, is money that you borrow for things that you don’t need and cannot afford. This type of debt is usually put on credit cards, and it usually comes with high interest rates. An example of bad debt is putting a vacation you cannot afford on a credit card.

Additionally, financial experts say that it is typically best if your long term debt payments such as your mortgage, credit card payments and car payment do not exceed 36 percent of your gross monthly income.

If you have too much of the bad kind of debt, you may want to consider a debt negotiation service to potentially lower the amount of bad debt that you owe. However, you will only want to work with a qualified service, such as a bankruptcy law firm, in doing this.

Keep reading to find out more about the debt negotiation service offered by our Milwaukee bankruptcy law firm.

No Comments

Leave a comment
Comment Information
Email Us For A Response

Free Case Evaluation

* indicates required field

Miller & Miller Law, LLC
  • VISA
  • Master Cards
  • Discover
Milwaukee Office map Madison Office map Kenosha Office map

633 W Wisconsin Ave, Suite 500
Milwaukee, WI 53203

Phone: 414-312-6581
Fax: 414-277-1303
Milwaukee Office

2810 Crossroads Drive
Suite 4001
Madison, WI 53718

Phone: 608-260-7133
Madison Office

6123 Green Bay Road
Suite 210
Kenosha, WI 53142

Phone: 262-326-1669
Kenosha Office

Appleton Office
4321 W. College Ave.
Suite 200
Appleton, WI 54914

Phone: 920-280-3838
Appleton Office

Brookfield Office
200 S. Executive Drive
Suite 101
Brookfield, WI 53005

Phone: 262-261-0665
Brookfield Office

Glendale Office
6333 N. Green Bay Avenue
Glendale, WI 53209

Phone: 414-973-8662
Glendale Office

Fax: 414-277-1303 - We also have offices in Appleton, Glendale and Brookfield to better serve you.