Debt : Good Debt And Bad Debt Essay

765 Words Sep 29th, 2015 4 Pages
Debt is something, practically money that is owed or due. No one likes to be in debt it’s not a good feeling and it makes you look bad. There are two types of debt: Good Debt and Bad Debt. Some people would disagree and argue that there’s no such thing as good debt because you still owe money, but after I explain the two I may switch some perspectives. Good Debt is investment debt that creates value. Bad Debt comes when discussing the purchase of disposable items or durable goods using high-interest credit cards and not paying the balance in full. Examples of Bad Debt are credit cards, Store credit cards, and Auto loans. These are all debts that can be avoided. Examples of Good Debt are things such as student loans, real estate loans, home mortgages, and business loans. These things have value. Good Debt helps you generate income and increases your net worth. Net worth is the amount by which assets exceed liabilities.
Now you may wonder huh? What are assets? What are liabilities? Well, assets are a useful a valuable thing, person or quality. They are similar to a bonus and a benefit so basically it is a good plus to your financial stability. Assets are also defines as property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies. Liabilities on the other hand are things for which someone is responsible especially a debt or financial obligation. Liabilities are also defined as legal obligations payable to a third party.…

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