Many people in the United States have been raised with the belief that you cannot get ahead or be successful without going into debt. Television and magazine ads tell us that we can have, or worse, need, everything that's new, everything that our neighbors have. Yes, they even tell us that our neighbors already have these things when, in fact, our neighbors quite probably could not afford them either. The advertisements tell us that all we need to do is put it on our credit card. The result is that most families today are living in debt for things they didn't need. And, because we bought what we were told we needed with money we have yet to earn, we have lost the ethic of working for what we want.
How much money you make is not what matters. What you do with the money you earn does. If you use credit to buy the latest and greatest items, you are undoubtedly paying more or those items that you would have paid if you purchased them for cash. The result is that you income no longer covers your expenses so the debt cycle grows.
It's true that some debt is good debt. Purchasing an item that will increase in value is a good debt. Securing a mortgage to purchase a home in a good neighborhood is a good debt because a home normally increases in value over time. You can always sell the home and pay off the mortgage debt.
Home equity loans can be considered either a good debt or a bad debt depending on how the money is used. If the money borrowed against the equity you have in your home is used to improve that home, then it is a good debt. A home equity loan becomes a bad debt if the money borrowed is used for such things as a family vacation or any other purpose that doesn't increase the resale value of your home. Always remember that failure to repay a home equity loan is cause for foreclosure on your home. It's foolish to take out a home equity loan for items that aren't needed.
Education loans should only be secured if that is absolutely the only way you can get an education. Starting a new life after graduation can be costly. You will have job hunting expenses, possible relocation costs, the cost of getting an apartment and many other expenses. Your budget will be tight. You could have to spend many years in an uncomfortable financial situation if you have loans to repay as well. If you can get your education while working and pay for that education as you go, you will start your new life on a much more secure footing.
Auto loans seem to have become a way of life in America. Consider them a bad debt. Most people secure an auto loan for 5 years, 60 payments. At the end of that 5 year period, the automobile is usually worth approximately a half of the original price. It's much better to purchase a cheap, but reliable, used car for cash if a car is necessary and save until you can buy a new car without using credit.
If you are already heavily in debt, consider speaking to a Christian debt counselor. Breaking the debt cycle can be a challenge, but the rewards can be so great that it's a challenge that you really need to face.
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