How to Make Debt Your Financial Friend
Debt doesn’t have to be your enemy. In fact, debt can be your financial ally! Yes, you read that right — we’re here to debunk the myth that all debt is bad and explain how you can leverage “good debt” to improve your financial wellness.
Here are a few examples of how debt can help you on your financial journey:
- Debt Builds Credit History
One of the biggest advantages of good debt is that it helps you build a positive credit history. Lenders look at your credit score when you apply for loans or credit cards, and a strong credit history typically opens doors to better interest rates and more favorable terms. If you want to raise your score, applying for a small loan or low-limit credit card and making intentional and timely payments on that debt can actively improve your credit history!
- Mortgages Open New Doors
Mortgages are a prime example of good debt. Instead of paying rent, you’re building equity in a property that may appreciate over time. Down the line, the equity that you built could even be used to open a Home Equity Line of Credit which would give you access to a flexible line of funds, often with lower interest rates than standard loans. Becoming a homeowner is a big decision, but it opens a lot of other financial avenues that you can use!
- Student Debt and Bright Futures
Student debt can be a sore subject, but investing in your education is a classic example of good debt. Education can lead to higher earning potential, resulting in better financial stability. Of course, it’s essential to manage your student loans wisely, but they can open doors to better career opportunities and increased income.
Tips for Using Good Debt Wisely
Now that you have an idea of how debt can be your financial ally, here are some tips for making the most of it:
- Plan and budget: Always have a clear plan for how you’ll use borrowed money and create a budget to ensure you can comfortably make the payments.
- Pay on time, every time: Timely payments are crucial for maintaining a good credit score and avoiding late fees.
- Stay informed: Continuously educate yourself about managing debt and investments. Financial literacy is your best tool!
Despite what you’ve often heard, debt isn’t necessarily the enemy. When used wisely, good debt can help you achieve your financial goals, build wealth, and secure your future. So, the next time you hear the word “debt,” remember that it can be your friend on the path to financial wellness. Happy borrowing!
https://www.nerdwallet.com/article/finance/good-debt-vs-bad-debt
