Good debt
If you borrow money for something that will increase in value, it’s considered a “good” debt. Good debts tend to come with low to moderate interest rates and will provide you with a return on your money. Examples include:
Bad debt
On the other hand, debt used to purchase something that will hold or decline in value is considered “bad” debt. Bad debts often come with high interest rates and don’t increase your net worth. These include:
- Credit cards
- Payday loans
- Car loans
- Personal loans used to redecorate your home, travel or buy consumer goods