Not All Debt Is Bad: Here’s When Debt Can Actually Help You

Bad debt refers to high-interest debt, like credit cards or personal loans, used for unnecessary purchases. It often leads to financial strain, as interest builds up if balances aren’t paid off monthly. Bad debt should be addressed quickly to avoid long-term damage to your credit and financial health.

Good debt, such as student loans or mortgages, is considered an investment in your future. These debts help you build wealth or advance your career. For example, student loans can increase your earning potential, while a mortgage allows you to build equity in a home.

Even with good debt, it's crucial to manage it wisely. Avoid borrowing more than necessary, and prioritize paying off debt quickly to minimize interest. Focus extra payments on reducing the principal to save money in the long term.