Let’s be honest—debt has a bad reputation. The word alone can make people cringe, picturing stacks of bills and endless payments. But what if I told you not all debt is bad? In fact, some types of debt can actually help you build wealth, grow opportunities, and improve your future. The key is knowing the difference between good debt and bad debt—and how to make borrowing work for you, not against you.

Good Debt: Your Financial Power Move

Good debt is an investment in your future. It helps you build wealth, generate income, or improve your life in a meaningful way. Here are a few examples:

1. Home Loans (Mortgages)

A home is one of the biggest purchases you’ll ever make, but it’s also an asset that typically grows in value. Instead of paying rent, you’re building equity—meaning, over time, you’re increasing your net worth. That’s a smart move!

2. Student Loans (Education is Power)

Higher education often leads to better job opportunities and higher income potential. Yes, student loans can feel overwhelming, but if they help you land a career that pays well, they can be worth it. Just be mindful of how much you borrow and whether your field has strong earning potential.

3. Business Loans (Investing in Your Dreams)

If you’re starting or expanding a business, a loan can provide the capital you need to grow. The key is ensuring your business plan is solid and that the loan will help you increase revenue and profits over time.

4. Investing in Yourself

Sometimes, personal development—like taking a certification course or learning a new skill—can pay off in the long run. If borrowing money helps you increase your income or open new doors, it can be a good investment.

Bad Debt: The Budget Breaker

Bad debt doesn’t increase your net worth or income—it simply drains your finances. These are debts that cost you more than they give back.

1. High-Interest Credit Cards

Using credit cards for everyday expenses without paying them off in full leads to sky-high interest payments. That coffee run might not seem like much, but if it sits on your card, you could be paying for that latte for months!

2. Payday Loans & High-Interest Personal Loans

These loans are designed to keep you in a cycle of debt. The interest rates are extreme, and paying them off becomes a struggle. If you need quick cash, consider alternatives like a personal budget review, a side hustle, or asking for assistance from trusted sources.

3. Car Loans for Luxury Vehicles

We all love a nice ride, but buying more car than you can afford is a classic case of bad debt. Unlike homes, cars depreciate in value, meaning you owe more on something that’s worth less over time. If you need a car, choose one that fits your budget and won’t stretch your finances too thin.

How to Manage Debt Wisely

Now that you know the difference, here are a few golden rules to keep your debt under control:

✔️ Borrow with purpose – If the debt helps you grow financially or personally, it’s likely a good investment.

✔️ Watch the interest rates – The lower the interest rate, the better. Always compare options before taking on debt.

✔️ Avoid debt for temporary wants – If it won’t matter in a year, don’t finance it. (Yes, that includes splurging on the latest gadgets!)

✔️ Pay more than the minimum – The faster you pay off debt, the less interest you pay overall.

✔️ Create a repayment plan – If you already have debt, make a clear plan to tackle it, starting with the highest-interest balances first.

Final Thoughts: Debt Should Work for YOU

Debt isn’t the enemy—it’s a tool. Used wisely, it can help you achieve your dreams, build wealth, and create a better future. But like any tool, it needs to be handled with care. Before borrowing, ask yourself: Will this help me grow financially or is it just adding stress?

If you’re not sure how to manage your debt or make smart borrowing choices, I’m here to help! Let’s build a financial future that makes you feel confident, secure, and excited for what’s ahead.

Need guidance? Let’s chat.

Lynn Marie Oates
Mortgage Loan Officer NMLS #1495433
(248) 875-1029
lynnoates@goforwardmortgage.com

As an experienced Mortgage Loan Officer, Lynn Marie Oates knows how overwhelming securing a mortgage can be and is committed to guiding you every step of the way. With a personalized approach, she provides comprehensive support and goes the extra mile to help you present your strongest offer on your dream home. Lynn’s passion is to help you achieve your homeownership goals!

Posted in Lynns Blogs