Reasons to And Not to Go Into Debt

Debt is a four-letter word that many people want to banish from their vocabularies and their lives. People have been known to commit suicide over their overwhelming debt, so how could there be good reasons to go into debt?

As revealed in Good Debt vs. Bad Debt, not all debt is bad. In fact, even “bad” debt isn’t so bad when it’s kept at a level reasonable for your income (read Do You Have Too Much Debt?

). Here are some good reasons to go into debt.

3 Reasons to Go Into Debt

Get a college degree. Statistics show that college graduates earn more than workers who only have a high school diploma. According to the U.S. Census Bureau, college graduates earn nearly double that of high school graduates. Taking out a student loan to pay for your college education might be a good idea, if you get a degree in a field that has a good income.

Buy a home. Generally, houses are considered an investment because they increase in value. Taking out a mortgage with the right terms will leave you with a valuable asset once the loan is repaid. Shop around for your home and your mortgage to make sure you’re making a sound investment.
How to Find the Best Mortgage, Home Buying and Selling.

Start a business. If you have a profitable business idea, taking out a loan to get you started is just a mere cost of starting up.

Using a loan to jumpstart a viable business is a wise thing to do. As you begin making money pay back the loan. Soon, you’ll be debt free and the profit you make will be yours to keep (or to reinvest in your business).
Small Business Loan 101, Small Business Information

5 Reasons Not To

  1. Go on vacation.
  1. Buy a designer purse/shades/shoes/you-name-it.
  2. Pay off other debt (unless you’re doing a balance transfer or debt consolidation loan with better terms).
  3. Buy gifts for others.
  4. Get furniture for the new house.

None of these are things that appreciate in value. In fact, all of these depreciate soon after you use them. You’re often left with debt and nothing to show for it. Instead of using credit or loans to pay for consumable goods, save up and use cash. That way you enjoy your purchase without worrying about paying for it later.

Good Debt Can Go Bad

If you're not careful, that good debt you took out can turn bad.

  • Don't take out more debt than you need to. Take out just enough student loans to cover your education expenses, just enough mortgage to purchase your home, and just enough business loan to cover your startup costs.
  • Make your payments on time or contact your lender asap. Making timely loan payments is key to keeping your credit score intact. All it takes it a couple months of late payments to wreck your credit score.