What makes a good debt? When a debt creates value, it is a good debt. Value is created when the investment produces more wealth over time. One such example is a family home, which appreciates in value.
Here are some situations when being in debt is actually worth it all.
1. According to research, being in a university increases saving in the long term. While finding a good paying job may be difficult for a new graduate, the Pew Research Center has concluded that an ordinary worker who has earned a bachelor’s degree has median earnings of $45,500 compared with $30,000 for a college level and $28,000 for a high school graduate. Being in student loan is worth the price.
However, not all college degrees pay off. A student loan would only be good when there is a clear career path. When a chosen career path does not generate a significant stream of income, a student loan can only help by choosing a cheaper university or the community college.
2. To own a home is still the greatest American Dream. However, buying a home requires 20% down payment. The US Census reported that as of June 2014, the average price of a new home is $331,400. Twenty percent of that is $66,280. That is $15,000 more than the average median income of an American household in 2012.
The good side of a home mortgage loan are the financial benefits. Once paid off, it becomes a valuable asset. It carries some tax benefits too. Owning a home is better than renting one. Its only downside would include additional expenses for maintenance and repairs but that would start affecting your budget on the fifth year, it looks like the benefits outweigh the downsides.
3. Is it worth to be in debt just to have a new car? It is expected that the average price of a new car would be $31,252. But despite the fact that the future of cars is changing rapidly, many Americans still want to own a new shiny car. This shows in the way many Americans overspend on new vehicles.
A car mortgage loan is favorable when you don’t have piling debts. Paying 20% down payment on a good-priced car and financing the remaining 80% over a handful of years may be a good strategy. Of course, you have to be ready for the extra costs like insurance and maintenance.