Good debt vs. bad debt

Category: Debt

Debt

You may have heard of loans being described as good debt or bad debt. It can be a bit perplexing—after all, isn’t all debt bad? Not always. In fact, having certain types of debt can actually be good, as it benefits your credit score. Here are some of the differences between bad debt and good debt: 

Good debt

Mortgages are often classified as good debt, in addition to car loans and home equity loans. Student loan debt can be filed under good debt, as long as it is a government loan and not a private loan. Business loans for new companies are also classified as good debt.

Bad debt

One of the most common examples of bad debt is credit card debt. This is especially the case if the debtor has multiple credit cards and/or is carrying high balances. If you can avoid credit card debt, you’re usually better off—at the very least, you’ll want to try and avoid credit cards with very high interest rates. In some situations, credit card debt can be somewhat helpful to your credit score. If you don’t have any other debt, but you have a single credit card with a long history and a small balance, you’ll usually want to keep the account active, without paying it off entirely.

Another example of bad debt is payday loans. According to the FTC, the interest rates for these types of loans are often quite alarming and start at around 300 percent. 

Avoiding bad debt

Nobody usually plans to pay tons of interest with a payday loan, nor get in a tremendous amount of credit card debt. Oftentimes, desperate times call for desperate measures. Some people might find themselves in difficult situations, perhaps as the result of an accident, illness, or job loss. They’ll turn to credit cards or risky loans because they need money as quickly as possible.

If this sounds like a familiar situation, but you’re receiving annuity or structured settlement payments, why wait for your money to arrive in periodic payments? You may have the option to receive more of it upfront in one lump sum payment by selling some or all of your future payments to Peachtree. 

Getting rid of bad debt

Paying off bad debt is a financial goal shared by many, but it can be a difficult one to reach. If you feel like you’re drowning in debt and there’s no way you’ll be able to pay it off, call Peachtree Financial Solutions. We can get you a lump sum of cash if you’re receiving structured settlement or annuity payments. Depending on how many payments you sell and how much debt you’re in, you might be able to completely eliminate your debt. Contact us today to find out how you can sell some or all of your future payments and receive the money you need to help pay off your debt.

Nothing above is meant to provide financial or tax advice. You should meet with appropriate professionals for such services.

Tags: business loans, credit cards, government loans, mortgages, Payday Loans, private loans, Student Loans

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