| Many people have been taught that you cannot get | | | | loan to refinance your mortgage. Home equity loans |
| ahead without debt. We are also inundated with | | | | generally have lower costs than conventional home |
| advertising telling us we can have anything we want. | | | | loans. |
| All we need to do is put it on our credit card. | | | | We consider school loans bad debt. If you finish school, |
| We have become an impatient society, we want it | | | | get a good high paying job and then attack the loan |
| right now. We have lost the ethic of working for what | | | | like mad, a school loan may work out. The problem is |
| we want. | | | | that there are too many things that can go wrong. At |
| It is not how much money you make; it is what you do | | | | best, even if you do graduate and get a good job |
| with it. By living without debt you can actually have a | | | | there are always a lot of other expenses at this time |
| higher income since you are not paying out interest, | | | | in ones life. You are really behind financially when you |
| you are actually getting paid interest on invested | | | | start your working life in debt. |
| money. | | | | Auto loans are bad loans that have become common |
| All debt is not created equal. We will classify them as | | | | practice to us. We pay interest on a vehicle that will |
| good debt and bad debt. | | | | only be worth one half of its original purchase price in |
| To simplify the classification we will say that good debt | | | | five years. Lately it has also been common for us to |
| is a loan for something that you could sell at any time | | | | borrow more than a vehicle is worth. We can trade a |
| and repay the debt. This narrows down good debt to | | | | car in that we still owe on, and roll that owed amount |
| a home loan and possibly a home equity loan. | | | | over into another vehicle. This gives us a loan amount |
| A bad debt, of course, is a loan on anything that will | | | | that is higher than the value of the car that we drive |
| lose value. | | | | away. We have lost our capacity to say NO. |
| Let's take a look at some debts that we would | | | | Co-signing is a bad debt that usually and unfortunately |
| consider bad debt. | | | | involves family. If someone cannot qualify for a loan at |
| Home equity loans are in the gray area. They could be | | | | a regular lending institution, they should not get a loan. |
| considered good debt if they are used to repair or | | | | The fact that they can't qualify for a loan elsewhere |
| improve your home, but you would be a lot better off | | | | should tell you that they are a huge risk. Use this |
| to just save up the money for the project. Home | | | | opportunity to teach them how they can get what |
| equity loans become bad debt when used for | | | | they want by working harder for it and delaying the |
| purposes other than home improvement or | | | | purchase. |
| maintenance. In other words a bad home equity loan is | | | | If you want to get off of the debt treadmill, you must |
| for anything that does not add to the value of your | | | | run as far away from debt as you can. You cannot |
| house. Do not jeopardize your home by taking out a | | | | use debt to get out of debt. Even if you do, you have |
| home equity loan on unnecessary items. | | | | not changed your habits; you must change your |
| One possible good use for a home equity loan is when | | | | lifestyle. |
| the interest rates are low. You can use a home equity | | | | |