Good debt

After watching all the commercials designed to snare people drowning in credit card bills, it’s hard to believe that there could be such a thing as good debt. But here are three areas where that just might be the case.

Your Mortgage

Doing everything in your power to pay down a mortgage puts a strain on your cash reserves and might not be the best move. Usually, mortgages have lower interest rates than other kinds of debts – plus that interest is tax deductible on the first million dollars of a mortgage. So don’t fear debt on your home – just make sure you can afford a decent down payment and that the basic monthly payments won’t be a strain.

College loans

When it comes to paying for your children’s higher education, it makes a lot more sense for them to take out low-interest student loans than for you to decimate your savings or retirement funds to make it happen. And the worst thing you can do is borrow against your home – you don’t want to risk losing it as you get older. Your kids will have a lot more time to pay their loans back than you will – and, by the way, you having a big 401k doesn’t count against them when applying for financial aid. It’s not a part of your available assets.  

Buying a car

A car loan makes a lot of sense if you can’t afford to pay cash and you plan on continuing to drive the car long after the loan is paid off. Again, put as much down as you can. If, however, you’re the kind that likes a new car every three years or so, a lease might be a better option for you.

Happy borrowing.