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Understanding Good Debt vs Bad Debt
12/17/2008 - By everylawfirm.com
To manage debt properly, it's important to begin understanding the difference between "good debt" versus "bad debt."
From a purely financial perspective, good debt is borrowing in order to purchase an asset that is likely to appreciate in value, for example, a home or business. Good debt may become "better" debt when the government subsidizes the repayments, as it does with a home mortgage interest deduction.
Conversely, bad debt is borrowing in order to purchase an asset that is likely to depreciate in value, for example, a car or borrowing for non-asset consumption such as a vacation. Bad debt has been made "worse" now that the government no longer subsidizes repayments for certain kinds of debts; interest on personal loans and credit card debt is no longer tax deductible.
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