Good debt and bad debt are often confused, even though the two are not really that different. You want to be careful with bad debt, however, because there are many options of debt consolidation you can get. Low-interest credit card debt can be a good source of additional income, depending on your ability to pay. High interest rates on other types of debt can also add up to a bad debt situation if you can’t keep up with payments and interest.

good debt

BAD DEBT. Low-interest, high-profits debt which helps you raise your net worth or income are good debt in determining whether or not you can make money using debt consolidation as a strategy. However, just like with good debt, too much of anything is never good, no matter how well you monetize it. Medical debt, for instance, does not neatly fit into either the good or bad debt categories. You’ll probably have to file bankruptcy if you get trapped in medical debt. On the other hand, having bad credit can seriously hamper your chances of being able to secure a loan to make money with.

HIGH Interest Rate Credit Card Debt. This sort of debt usually comes with very high interest rates. Even if you do manage to keep up payments, you may find yourself paying back twice what you originally borrowed in a relatively short period of time. The good news, however, is that high interest rate credit card debt is a common result of high interest rates on other forms of unsecured credit card debt.

GOOD DEBASE Value of Your Loan. When determining whether or not you can make money by combining loans, you need to think about the value of each loan to your net worth. If you’re taking out a line of credit to purchase a major item, such as a house, then your goal is probably best achieved by using a lower interest rate loan.

MINIMUM AMOUNTS Needed for a New Home. If your financial goals are too lofty, it’s sometimes impossible to think about a down payment on a new home. For those who need a mortgage but don’t want to get into a bidding war, getting subprime auto loans could be a good idea. Just make sure to take care of any bad credit cards before you sign up for a new auto loan. You don’t want to start out with bad credit and then have to pay astronomical interest rates.

GOOD ALLOCATION OF YOUR LOAN RESERVE As discussed above, part of your loan to value is the amount of money you’ll be putting down on a new house. But how will you be using the money? Will it be to pay down existing debt, or to fund a new vehicle? When you’re figuring out your long term financial goals, make sure to keep this in mind and allocate your borrowing money to the right purposes.

DEFLY-Borrowing Money to Cover Expenses Once you’ve figured out how much your new home will cost and how much the down payment will be, you can focus on paying off other bad debts and saving money to go toward a down payment. Any extra money you can save by reducing your expenses is good debt money. By paying off those debts, you can create a more stable financial future and create a more positive financial future for yourself and your family. This is the best time to be thinking about your net worth.

Creating a stable financial future starts with paying off old debts and creating a monthly budget. A good debt advisor can help you get started on the right path toward building wealth and financial independence. Whether you’re paying off a high interest credit card, a large mortgage, or a high interest payday loan, you want to make sure you have the right plan in place. With the right debt help, you can get control of your debt and get on the path to having a more financially secure future.