No bad debt forever. According to Suze Orman, author of the book Women & Money: Owning the Power to Control Your Destiny, some types of debt can be categorized as a good loan.
Debt”itself is not bad. The problem is how you handle it. If you care about kids, you have to start caring about money. I would not be surprised if they end up having financial disaster because you give examples of wrong.”
According to Orman, parents who are not able to properly manage the family finances would have difficulty financing their child’s education. In addition, in the old days they could also troublesome because the child does not have savings for retirement.
Good loan vs bad loans
Orman explains, the difference between good loans and bad loans is how it affects your ability to achieve financial goals. A good loan can help you reach your financial goals, while bad loans would only bring about financial problems.
”Knowing the difference between good loans and bad loans is key to achieving financial prosperity,’’said Orman.
Which includes loans such as loans either to purchase assets, such as a house or a mortgage, education or student loans, medical loans, and business debt. Meanwhile, the bad loans is the amount of money borrowed to finance the desire or the depreciation of assets such as cars, credit card accounts, home equity, and so forth.
According to Brad Stroh of Bills.com, to be categorized as a good loan, a loan must meet the following conditions:
1. Debt should be limited, without the ability to continue to increase. Meanwhile, revolving accounts like credit cards is the opposite.
2. Interest rate on debt should be stable, at a reasonable level and predictable.
3. Debt should have a regular payment amount that can be managed within budget and on time to avoid late payment penalties and penalty interest rates rise.
4. Debt is a purpose deemed reasonable by most people.
5. Debt was issued for something that precious like buying a house or invest.