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Is There Really Such a Thing as Good Debt?


An old saying goes that if you have zero debts and you have ten dollars in your pocket, you are the richest person you know.  Many of us would love to live debt free, but we simply cannot afford to provide for all our necessary expenses without borrowing.  Most debt free people have benefited from a few freebies along the way.  For example, the proverbial debt free guy with ten dollars in his pocket probably inherited his house from his parents (maybe he lived with them his whole life, which was a frugal choice), and therefore he became a homeowner without ever making mortgage payments.  This enabled him to save up to buy a car without financing.  Not everyone has that kind of financial flexibility; we will have to go into debt for something.  Members of the 99 percent must choose the debts that will get us the funds we need without causing us to spend decades making payments and end up repaying much more than we ever borrowed.  If you need help with long-term strategy about borrowing and debt repayment, contact a Boca Raton debt lawyer.

The Best Kinds of Debt

The best kinds of debt are the kinds that enable you to buy a valuable asset.  The classic example is a home mortgage.  If you take out a $500,000 mortgage loan to buy the house, you might pay $700,000 in principal, interest, and fees over the term of the loan, but by the time you pay it off, you will own a house worth $900,000.  It doesn’t work quite this way with car loans, because cars depreciate so quickly that the amount of money you spend on the loan usually exceeds the value of the car by the time you own it outright.

The Worst Kinds of Debt

The worst kinds of debt are the kinds that arise from financial emergencies and make them worse.  Medical debt and payday loans do not improve anyone’s financial situation in the long term.  Unfortunately, the only way to avoid them is to get a job with sufficient pay and employer-provided health insurance, which is easier said than done.

Debt That Is Worse Than It Sounds

College admissions officers will tell you that college education is an investment, and it is.  Yes, college graduates tend to earn much more money than people who did not attend college.  Despite this, many graduates have had student loan debt following them around for decades.  If possible, choose the course of study that will enable you to take on the least debt.  This could include taking dual enrollment classes in high school, choosing community colleges and in-state public universities over private universities, and studying part-time while working.

Debt That Is Better Than It Sounds

Debt consolidation loans are low interest personal loans that you use to pay off other kinds of debt.  They are a good way of paying off medical bills, payday loans, credit card debt, and in some cases even student loans.  If you can qualify for a debt consolidation loan, it will improve your financial situation in the long term.

Work With a Debt Lawyer About Getting Out of Debt

A South Florida debt lawyer can help you prioritize which debts to pay off first.  Contact Nowack & Olson, PLLC in Boca Raton, Florida to discuss your case.



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