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What it means to have good debt

People in Massachusetts who work hard to keep their debts down might like to know that some types of debt are not necessarily a bad thing. Experts distinguish between good and bad debt, and recognize that some kinds of debt are unavoidable. Interest rates and reasons for taking on debt have much to do with whether or not debt can be considered good or bad.

Student loan debt is generally considered to be an investment in a person's future and can lead to a higher paying job. Likewise, investment in a home or car are considered to be positive steps, as long as someone does not purchase a house or a vehicle that he or she cannot afford.

Bad debt usually comes with high-interest rates, particularly when other options could be available. Payday loans have notoriously high interest rates, and financial experts warn against them. They suggest seeking lower interest loans or even borrowing from friends or family instead.

Credit cards fall into the category of good debt that can turn bad. Paying off balances every month is advised. Because that is not always possible, lower interest cards can help, and making on-time payments every month can save money on late fees.

Some debt is unavoidable, like medical bills. Experts advise that people with medical bills to pay should look for options, such as payment plans, negotiating costs or hiring a professional advocate to negotiate costs for you.

Medical debt, along with credit card debt, is dischargeable in bankruptcy. That means that depending on what type of bankruptcy someone files, he or she may see these debts dismissed in exchange for the liquidation of some assets, or be able to reorganization his or her debts and make payments towards them for a set period of time before remaining debt is dismissed. Every type of bankruptcy brings with it relief from debt collections. Collection calls, wage garnishing and other types of debt collection efforts are legally halted when someone files bankruptcy.

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