Debt is not forever bad. According to Suze Orman, author of Women & Money: Owning the Power to Control Your Destiny, some types of debt can be categorized as a good loan. Debt is not bad. The problem is how you handle it. If you care about children, you must begin to care about the money. I would not be surprised if they eventually experience a financial catastrophe because you give examples of wrong.” According to Orman, parents who are unable 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 has no savings for retirement.
Good vs. bad debts
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 financial problems. ”Knowing the difference between good credit and bad credit is key to achieving financial prosperity,’ said Orman.the example of good debts such as loans either to purchase an asset, such as a home or mortgage, education or student loans, medical loans, and business debt. Meanwhile, the bad loan is a sum of money borrowed to finance the desire or depreciating assets like cars, credit card accounts, home equity, and so forth.
According to Brad Stroh of Bills.com, to be categorized as either a loan, a loan must meet several conditions of the following:
1. Debt should be limited, without the ability to continue increasing. Meanwhile, revolving accounts like credit cards is just the opposite.
2. Debt interest rates must be stable, at levels reasonable and predictable.
3. Debt must have the amount of regular payments that can be managed within budget and on time to avoid penalties for late payment and interest rate increases.
4. Debt has a purpose deemed reasonable by most people.
5. Debt was issued for something that valuable like buying a house or invests.