3 Types of Good Debt

Wait a minute – there is such a thing as good debt? Yes, you heard us right! Not all debt is created equal, and some debt can actually be beneficial if managed correctly.

Good Debt vs. Bad Debt

Before we discuss “good debt”, let’s first clarify what “bad debt” is. Bad debt comes with high interest rates and the potential for defaulting on payments which can lead to expensive late fees, penalties, and even bankruptcy.

So, what is “good debt”? Good debt comes in two forms – investment loans (like mortgages) and student loans. These types of debts have low-interest rates because they’re secured by assets like property or education credentials respectively. Both of these forms of “good” debts come with some risk but also offer substantial rewards if managed correctly!

Learn more about 3 types of good debt – how to manage them effectively and how to make them work for you.

Student Loans

One type of good debt is student loans. Student loans help you get an education, which can lead to a higher-paying job. You can use the extra money to pay off your student loans faster, and you may even be able to get a lower interest rate.

Types of Student Loans

There are two types of student loans: government loans and private loans. Government loans are offered by the government, and private loans are offered by banks and other lenders.

Government loans usually have lower interest rates and offer more flexibility than private loans. Private loans usually have higher interest rates, and they may require a co-signer.

If you’re looking for a student loan, be sure to compare the interest rates and terms of different loans.

Be Smart about Student Loans

However, you should be smart about student loans. Don’t take out more student loans than you need, and make sure you can afford the monthly payments. You should also look for scholarships and grants to help pay for school.

Remember student loans are not free money – they are an investment that you need to pay back, so make sure that there will be a return on that investment. Hold off on going to college until you’ve researched and decided upon a major that you know you will enjoy and is in high demand. Do the math and know how long it will take you to repay your student loans after graduation based upon your anticipated salary.


Another type of good debt is mortgages. Mortgages are a way to buy a home. A mortgage usually has a lower interest rate than other types of debt, and you can deduct the interest from your taxes.

Be Smart About Mortgages

If you’re thinking about getting a mortgage, be sure to do your research. Mortgage interest rates vary, and you don’t want to end up with a mortgage that has a high interest rate.

You should also make sure you can afford the monthly payments. Mortgages usually have lower monthly payments than other types of debt, but they also last for a longer period of time.

Be sure to compare the terms of different mortgages before you decide on one.

Remember, a mortgage is a long-term loan – you’ll be paying it off for years! Make sure you can afford the monthly payments and that the mortgage is a good fit for your budget.

Business Loans

The final type of good debt is business loans. A business loan can help you start or grow your business. Business loans usually have a lower interest rate than credit cards, and you can use the money for any purpose.

Be Smart about Business Loans

Be sure to do your research before you take out a business loan. You should also make sure the loan is for a purpose that will help your business grow. For example, you might use a business loan to purchase new equipment or to hire new employees.

When you’re looking for a business loan, be sure to compare the terms of different loans. Some loans have lower interest rates, while others offer more flexibility. Make sure you can afford the monthly payments, and that the purpose behind securing the loan is to help you drive further profits.

Want more info about good debt and how to manage it?

Check out Sarah’s Wealthy Wednesday Live discussion on Good Debt in our Money Bitch Facebook Community on Wednesday, April 20th. If you want a one-on-one consultation, book a discovery call with us.