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Do You Own Good Debt or Bad Debt?

credit sesame BY: DO YOU OWN www.creditsesame.com GOOD DEBT OR BAD DEBT That's right, we said it -- there is such a thing as Good Debt. If managed wisely, debt doesn't always have to be a negative thing. Simply stated, debt is good when it produces a positive cash flow, and bad when it doesn't. That said, whether debt is good or bad isn't as black and white as anyone would like. The following guide will help you differentiate the good from the bad, so that you can get a feel for the kind of debt you hold. Americans Love Their Debt (..Or at least they own a lot of it) • Total U.S. consumer debt was $2.45 trillion, as of March 2010 Credit Card Debt • In households who held credit card debt, the average total debt (including credit cards, mortgage, home equity, student loans and more) was $54,000. (That's down from • Total U.S. consumer revolving debt (mostly credit card debt) was $852.6 billion in • Average credit card debt per household with credit card debt was $16,007 in March 2010. March 2010 $93,850 in 2008.) $852.6 billion $16,007 2008 2010 Mortgage Debt • At the end of the third quarter, 2010, American consumers had a total outstanding mortgage debt of $10.6 trillion for single to four-family residences. • In the third quarter of 2010, 66.9% of Americans owned a home, that's down from the 2004 peak of 69.2%. However, this includes homeowners with negative equity mortgages (upside-down or underwater). • At the end of the third quarter, 2010, 10.8 million or 22.5% of all residential properties with mortgages had negative equity. 10.6 trillion 22.5% 2004 2010 Automobile & Student Loans In October, 2010, American consumers had $264 billion outstanding in • Education loans outstanding, both federal and private, reached $833 billion in June 2010. automobile loans and leases combined. $264 billion $833 billion Credit Scores • According to FICO Inc., 25.5 percent of U.S. consumers - roughly 43 million people – had a credit score below 600 in July 2010, forcing lenders to mark them as high risk loan candidates. What Is Good Debt? Wait, Is There Such a Thing as Good Debt? Yup, there can be. Most people can't afford to fund activities like attending college, starting a business, or owning a home without having to borrow. While each loan will have its own unique set of characteristics, most agree that borrowing money to pay for things that will increase in value (such as being able to earn more money, 43 million = 1 million people your business turning a profit, or the price of your house going up) is Good Debt. • Those with credit scores under 600 now have a very difficult time getting credit cards, auto loans, or mortgages due to the strict lending standards that have been implemented by banks. Essentially, good debt is debt that will eventually make you money. What is Bad Debt? So, What Makes It Good? Essentially, Bad Debt is any form of debt that does nothing to increase an individual's cash flow, value, or wealth in the long run. Good Debt will always create So, What Makes It Bad? value Good Debt may lead to more wealth in the long run DEBT Bad Debt will always provide a negative return Bad Debt does not provide you with tax advantages Good Debt will create cash flow Good Debt will often provide you with tax advantages DEBT 1040 DEBT 1049 DEBT Bad Debt usually purchases goods that decrease in value Forms of Good Forms of Bad DEBT Debt Include: Debt Include: Luxury Items: Pay Cash Credit Card Debt: Pay Cash Purchases of things like groceries, dining, clothing, and fuel - things that should be covered by your monthly wage Shelter: Charge it Business: Charge it Items that are unnecessary to own, like jewelry, extravagant furniture or custom bomb shelters Mortgage Business loans Taking out an equity loan or line of credit to fund home renovations The purchase of items on credit that are necessary for the operation of your business Education: Charge it Automobile: Charge it Automobile: Pay Cash Travel & Entertainment: Student Loans Pay Cash Payment for education programs that will make you more money in the long run A non-luxury vehicle with the purpose of getting you to places where you will make money Tricking out your car with expensive after-market parts -Personal Travel or a family An expensive luxury vehicle (they lose a lot of value when driven off the lot) vacation Parties, concerts, bars Investing: Charge it Investing: Pay Cash Real estate investment loans Investments that provide a lower rate of return than the interest rate Trading stocks on margin (this is risky, but can be a good move if the investor knows what they are doing) being paid on the debt Sources: money.cnn.com | bankrate.com | creditcards.com | msn.com | latimes.com | corelogic.com | federalreserve.gov | federalstudentaid.ed.gov | finaid.org credit sesame BY: DO YOU OWN www.creditsesame.com GOOD DEBT OR BAD DEBT That's right, we said it -- there is such a thing as Good Debt. If managed wisely, debt doesn't always have to be a negative thing. Simply stated, debt is good when it produces a positive cash flow, and bad when it doesn't. That said, whether debt is good or bad isn't as black and white as anyone would like. The following guide will help you differentiate the good from the bad, so that you can get a feel for the kind of debt you hold. Americans Love Their Debt (..Or at least they own a lot of it) • Total U.S. consumer debt was $2.45 trillion, as of March 2010 Credit Card Debt • In households who held credit card debt, the average total debt (including credit cards, mortgage, home equity, student loans and more) was $54,000. (That's down from • Total U.S. consumer revolving debt (mostly credit card debt) was $852.6 billion in • Average credit card debt per household with credit card debt was $16,007 in March 2010. March 2010 $93,850 in 2008.) $852.6 billion $16,007 2008 2010 Mortgage Debt • At the end of the third quarter, 2010, American consumers had a total outstanding mortgage debt of $10.6 trillion for single to four-family residences. • In the third quarter of 2010, 66.9% of Americans owned a home, that's down from the 2004 peak of 69.2%. However, this includes homeowners with negative equity mortgages (upside-down or underwater). • At the end of the third quarter, 2010, 10.8 million or 22.5% of all residential properties with mortgages had negative equity. 10.6 trillion 22.5% 2004 2010 Automobile & Student Loans In October, 2010, American consumers had $264 billion outstanding in • Education loans outstanding, both federal and private, reached $833 billion in June 2010. automobile loans and leases combined. $264 billion $833 billion Credit Scores • According to FICO Inc., 25.5 percent of U.S. consumers - roughly 43 million people – had a credit score below 600 in July 2010, forcing lenders to mark them as high risk loan candidates. What Is Good Debt? Wait, Is There Such a Thing as Good Debt? Yup, there can be. Most people can't afford to fund activities like attending college, starting a business, or owning a home without having to borrow. While each loan will have its own unique set of characteristics, most agree that borrowing money to pay for things that will increase in value (such as being able to earn more money, 43 million = 1 million people your business turning a profit, or the price of your house going up) is Good Debt. • Those with credit scores under 600 now have a very difficult time getting credit cards, auto loans, or mortgages due to the strict lending standards that have been implemented by banks. Essentially, good debt is debt that will eventually make you money. What is Bad Debt? So, What Makes It Good? Essentially, Bad Debt is any form of debt that does nothing to increase an individual's cash flow, value, or wealth in the long run. Good Debt will always create So, What Makes It Bad? value Good Debt may lead to more wealth in the long run DEBT Bad Debt will always provide a negative return Bad Debt does not provide you with tax advantages Good Debt will create cash flow Good Debt will often provide you with tax advantages DEBT 1040 DEBT 1049 DEBT Bad Debt usually purchases goods that decrease in value Forms of Good Forms of Bad DEBT Debt Include: Debt Include: Luxury Items: Pay Cash Credit Card Debt: Pay Cash Purchases of things like groceries, dining, clothing, and fuel - things that should be covered by your monthly wage Shelter: Charge it Business: Charge it Items that are unnecessary to own, like jewelry, extravagant furniture or custom bomb shelters Mortgage Business loans Taking out an equity loan or line of credit to fund home renovations The purchase of items on credit that are necessary for the operation of your business Education: Charge it Automobile: Charge it Automobile: Pay Cash Travel & Entertainment: Student Loans Pay Cash Payment for education programs that will make you more money in the long run A non-luxury vehicle with the purpose of getting you to places where you will make money Tricking out your car with expensive after-market parts -Personal Travel or a family An expensive luxury vehicle (they lose a lot of value when driven off the lot) vacation Parties, concerts, bars Investing: Charge it Investing: Pay Cash Real estate investment loans Investments that provide a lower rate of return than the interest rate Trading stocks on margin (this is risky, but can be a good move if the investor knows what they are doing) being paid on the debt Sources: money.cnn.com | bankrate.com | creditcards.com | msn.com | latimes.com | corelogic.com | federalreserve.gov | federalstudentaid.ed.gov | finaid.org credit sesame BY: DO YOU OWN www.creditsesame.com GOOD DEBT OR BAD DEBT That's right, we said it -- there is such a thing as Good Debt. If managed wisely, debt doesn't always have to be a negative thing. Simply stated, debt is good when it produces a positive cash flow, and bad when it doesn't. That said, whether debt is good or bad isn't as black and white as anyone would like. The following guide will help you differentiate the good from the bad, so that you can get a feel for the kind of debt you hold. Americans Love Their Debt (..Or at least they own a lot of it) • Total U.S. consumer debt was $2.45 trillion, as of March 2010 Credit Card Debt • In households who held credit card debt, the average total debt (including credit cards, mortgage, home equity, student loans and more) was $54,000. (That's down from • Total U.S. consumer revolving debt (mostly credit card debt) was $852.6 billion in • Average credit card debt per household with credit card debt was $16,007 in March 2010. March 2010 $93,850 in 2008.) $852.6 billion $16,007 2008 2010 Mortgage Debt • At the end of the third quarter, 2010, American consumers had a total outstanding mortgage debt of $10.6 trillion for single to four-family residences. • In the third quarter of 2010, 66.9% of Americans owned a home, that's down from the 2004 peak of 69.2%. However, this includes homeowners with negative equity mortgages (upside-down or underwater). • At the end of the third quarter, 2010, 10.8 million or 22.5% of all residential properties with mortgages had negative equity. 10.6 trillion 22.5% 2004 2010 Automobile & Student Loans In October, 2010, American consumers had $264 billion outstanding in • Education loans outstanding, both federal and private, reached $833 billion in June 2010. automobile loans and leases combined. $264 billion $833 billion Credit Scores • According to FICO Inc., 25.5 percent of U.S. consumers - roughly 43 million people – had a credit score below 600 in July 2010, forcing lenders to mark them as high risk loan candidates. What Is Good Debt? Wait, Is There Such a Thing as Good Debt? Yup, there can be. Most people can't afford to fund activities like attending college, starting a business, or owning a home without having to borrow. While each loan will have its own unique set of characteristics, most agree that borrowing money to pay for things that will increase in value (such as being able to earn more money, 43 million = 1 million people your business turning a profit, or the price of your house going up) is Good Debt. • Those with credit scores under 600 now have a very difficult time getting credit cards, auto loans, or mortgages due to the strict lending standards that have been implemented by banks. Essentially, good debt is debt that will eventually make you money. What is Bad Debt? So, What Makes It Good? Essentially, Bad Debt is any form of debt that does nothing to increase an individual's cash flow, value, or wealth in the long run. Good Debt will always create So, What Makes It Bad? value Good Debt may lead to more wealth in the long run DEBT Bad Debt will always provide a negative return Bad Debt does not provide you with tax advantages Good Debt will create cash flow Good Debt will often provide you with tax advantages DEBT 1040 DEBT 1049 DEBT Bad Debt usually purchases goods that decrease in value Forms of Good Forms of Bad DEBT Debt Include: Debt Include: Luxury Items: Pay Cash Credit Card Debt: Pay Cash Purchases of things like groceries, dining, clothing, and fuel - things that should be covered by your monthly wage Shelter: Charge it Business: Charge it Items that are unnecessary to own, like jewelry, extravagant furniture or custom bomb shelters Mortgage Business loans Taking out an equity loan or line of credit to fund home renovations The purchase of items on credit that are necessary for the operation of your business Education: Charge it Automobile: Charge it Automobile: Pay Cash Travel & Entertainment: Student Loans Pay Cash Payment for education programs that will make you more money in the long run A non-luxury vehicle with the purpose of getting you to places where you will make money Tricking out your car with expensive after-market parts -Personal Travel or a family An expensive luxury vehicle (they lose a lot of value when driven off the lot) vacation Parties, concerts, bars Investing: Charge it Investing: Pay Cash Real estate investment loans Investments that provide a lower rate of return than the interest rate Trading stocks on margin (this is risky, but can be a good move if the investor knows what they are doing) being paid on the debt Sources: money.cnn.com | bankrate.com | creditcards.com | msn.com | latimes.com | corelogic.com | federalreserve.gov | federalstudentaid.ed.gov | finaid.org credit sesame BY: DO YOU OWN www.creditsesame.com GOOD DEBT OR BAD DEBT That's right, we said it -- there is such a thing as Good Debt. If managed wisely, debt doesn't always have to be a negative thing. Simply stated, debt is good when it produces a positive cash flow, and bad when it doesn't. That said, whether debt is good or bad isn't as black and white as anyone would like. The following guide will help you differentiate the good from the bad, so that you can get a feel for the kind of debt you hold. Americans Love Their Debt (..Or at least they own a lot of it) • Total U.S. consumer debt was $2.45 trillion, as of March 2010 Credit Card Debt • In households who held credit card debt, the average total debt (including credit cards, mortgage, home equity, student loans and more) was $54,000. (That's down from • Total U.S. consumer revolving debt (mostly credit card debt) was $852.6 billion in • Average credit card debt per household with credit card debt was $16,007 in March 2010. March 2010 $93,850 in 2008.) $852.6 billion $16,007 2008 2010 Mortgage Debt • At the end of the third quarter, 2010, American consumers had a total outstanding mortgage debt of $10.6 trillion for single to four-family residences. • In the third quarter of 2010, 66.9% of Americans owned a home, that's down from the 2004 peak of 69.2%. However, this includes homeowners with negative equity mortgages (upside-down or underwater). • At the end of the third quarter, 2010, 10.8 million or 22.5% of all residential properties with mortgages had negative equity. 10.6 trillion 22.5% 2004 2010 Automobile & Student Loans In October, 2010, American consumers had $264 billion outstanding in • Education loans outstanding, both federal and private, reached $833 billion in June 2010. automobile loans and leases combined. $264 billion $833 billion Credit Scores • According to FICO Inc., 25.5 percent of U.S. consumers - roughly 43 million people – had a credit score below 600 in July 2010, forcing lenders to mark them as high risk loan candidates. What Is Good Debt? Wait, Is There Such a Thing as Good Debt? Yup, there can be. Most people can't afford to fund activities like attending college, starting a business, or owning a home without having to borrow. While each loan will have its own unique set of characteristics, most agree that borrowing money to pay for things that will increase in value (such as being able to earn more money, 43 million = 1 million people your business turning a profit, or the price of your house going up) is Good Debt. • Those with credit scores under 600 now have a very difficult time getting credit cards, auto loans, or mortgages due to the strict lending standards that have been implemented by banks. Essentially, good debt is debt that will eventually make you money. What is Bad Debt? So, What Makes It Good? Essentially, Bad Debt is any form of debt that does nothing to increase an individual's cash flow, value, or wealth in the long run. Good Debt will always create So, What Makes It Bad? value Good Debt may lead to more wealth in the long run DEBT Bad Debt will always provide a negative return Bad Debt does not provide you with tax advantages Good Debt will create cash flow Good Debt will often provide you with tax advantages DEBT 1040 DEBT 1049 DEBT Bad Debt usually purchases goods that decrease in value Forms of Good Forms of Bad DEBT Debt Include: Debt Include: Luxury Items: Pay Cash Credit Card Debt: Pay Cash Purchases of things like groceries, dining, clothing, and fuel - things that should be covered by your monthly wage Shelter: Charge it Business: Charge it Items that are unnecessary to own, like jewelry, extravagant furniture or custom bomb shelters Mortgage Business loans Taking out an equity loan or line of credit to fund home renovations The purchase of items on credit that are necessary for the operation of your business Education: Charge it Automobile: Charge it Automobile: Pay Cash Travel & Entertainment: Student Loans Pay Cash Payment for education programs that will make you more money in the long run A non-luxury vehicle with the purpose of getting you to places where you will make money Tricking out your car with expensive after-market parts -Personal Travel or a family An expensive luxury vehicle (they lose a lot of value when driven off the lot) vacation Parties, concerts, bars Investing: Charge it Investing: Pay Cash Real estate investment loans Investments that provide a lower rate of return than the interest rate Trading stocks on margin (this is risky, but can be a good move if the investor knows what they are doing) being paid on the debt Sources: money.cnn.com | bankrate.com | creditcards.com | msn.com | latimes.com | corelogic.com | federalreserve.gov | federalstudentaid.ed.gov | finaid.org credit sesame BY: DO YOU OWN www.creditsesame.com GOOD DEBT OR BAD DEBT That's right, we said it -- there is such a thing as Good Debt. If managed wisely, debt doesn't always have to be a negative thing. Simply stated, debt is good when it produces a positive cash flow, and bad when it doesn't. That said, whether debt is good or bad isn't as black and white as anyone would like. The following guide will help you differentiate the good from the bad, so that you can get a feel for the kind of debt you hold. Americans Love Their Debt (..Or at least they own a lot of it) • Total U.S. consumer debt was $2.45 trillion, as of March 2010 Credit Card Debt • In households who held credit card debt, the average total debt (including credit cards, mortgage, home equity, student loans and more) was $54,000. (That's down from • Total U.S. consumer revolving debt (mostly credit card debt) was $852.6 billion in • Average credit card debt per household with credit card debt was $16,007 in March 2010. March 2010 $93,850 in 2008.) $852.6 billion $16,007 2008 2010 Mortgage Debt • At the end of the third quarter, 2010, American consumers had a total outstanding mortgage debt of $10.6 trillion for single to four-family residences. • In the third quarter of 2010, 66.9% of Americans owned a home, that's down from the 2004 peak of 69.2%. However, this includes homeowners with negative equity mortgages (upside-down or underwater). • At the end of the third quarter, 2010, 10.8 million or 22.5% of all residential properties with mortgages had negative equity. 10.6 trillion 22.5% 2004 2010 Automobile & Student Loans In October, 2010, American consumers had $264 billion outstanding in • Education loans outstanding, both federal and private, reached $833 billion in June 2010. automobile loans and leases combined. $264 billion $833 billion Credit Scores • According to FICO Inc., 25.5 percent of U.S. consumers - roughly 43 million people – had a credit score below 600 in July 2010, forcing lenders to mark them as high risk loan candidates. What Is Good Debt? Wait, Is There Such a Thing as Good Debt? Yup, there can be. Most people can't afford to fund activities like attending college, starting a business, or owning a home without having to borrow. While each loan will have its own unique set of characteristics, most agree that borrowing money to pay for things that will increase in value (such as being able to earn more money, 43 million = 1 million people your business turning a profit, or the price of your house going up) is Good Debt. • Those with credit scores under 600 now have a very difficult time getting credit cards, auto loans, or mortgages due to the strict lending standards that have been implemented by banks. Essentially, good debt is debt that will eventually make you money. What is Bad Debt? So, What Makes It Good? Essentially, Bad Debt is any form of debt that does nothing to increase an individual's cash flow, value, or wealth in the long run. Good Debt will always create So, What Makes It Bad? value Good Debt may lead to more wealth in the long run DEBT Bad Debt will always provide a negative return Bad Debt does not provide you with tax advantages Good Debt will create cash flow Good Debt will often provide you with tax advantages DEBT 1040 DEBT 1049 DEBT Bad Debt usually purchases goods that decrease in value Forms of Good Forms of Bad DEBT Debt Include: Debt Include: Luxury Items: Pay Cash Credit Card Debt: Pay Cash Purchases of things like groceries, dining, clothing, and fuel - things that should be covered by your monthly wage Shelter: Charge it Business: Charge it Items that are unnecessary to own, like jewelry, extravagant furniture or custom bomb shelters Mortgage Business loans Taking out an equity loan or line of credit to fund home renovations The purchase of items on credit that are necessary for the operation of your business Education: Charge it Automobile: Charge it Automobile: Pay Cash Travel & Entertainment: Student Loans Pay Cash Payment for education programs that will make you more money in the long run A non-luxury vehicle with the purpose of getting you to places where you will make money Tricking out your car with expensive after-market parts -Personal Travel or a family An expensive luxury vehicle (they lose a lot of value when driven off the lot) vacation Parties, concerts, bars Investing: Charge it Investing: Pay Cash Real estate investment loans Investments that provide a lower rate of return than the interest rate Trading stocks on margin (this is risky, but can be a good move if the investor knows what they are doing) being paid on the debt Sources: money.cnn.com | bankrate.com | creditcards.com | msn.com | latimes.com | corelogic.com | federalreserve.gov | federalstudentaid.ed.gov | finaid.org

Do You Own Good Debt or Bad Debt?

shared by amie on May 14
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If manage it wisely, debt does not have to be a bad thing. The trick is learning how to manage it properly -- and what kind of debt you should avoid at all costs. This infographic looks at the differ...

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