Unlike the common perception, not all debt is evil. There are good debts too. A good debt is basically an investment debt that helps you make money; for example, student loans, car loans, real-estate loans, home loans and business loans. In simpler terms the debts that carry low interest or are tax-deductible or the ones that turn out more money in the long run can be categorized as good debts.

A perfect example of good debt is mortgage loan that is taken out to buy a home. Home mortgages usually carry lower interest rates than other debt and there is an added advantage too….the interest on mortgage loan is tax deductible. If you look at the flipside then you might find that mortgages are long-term loans (some of them stretch till 20 years). But look at the relatively low monthly payments you have to make with a 20 year mortgage; it allows you to utilize the left money for investments and emergencies. The ideal situation with mortgage loans comes when the home increases in market value over a due course of time.

Like home mortgages, an auto loan is another example of good debt
In cases where the vehicle is essential for doing business, an auto loan is a kind of debt that has no whiff of badness. But for people who use vehicles for their personal use should pay as much as possible up front because cars and trucks lose value over time.

Taking out a student loan to finance your children’s education is also a good debt. Student loans usually have a very low interest rate compared to other types of debt and do not forget that a good college education will increase their value as an employee. Drawing out a student loan makes far more sense than liquidating or borrowing against your retirement fund.

So, whatever route you plan to opt for, whether you wanna go for a student loan, home mortgage or auto loan, my advice would be to shop for the best deals.

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