Debt is tricky. Though it’s an extremely useful financial tool many people depend on, it can be very dangerous when used improperly or carelessly. Here’s a quick rundown of the different roles debt can take on:
The (sort of) Good
Many responsible people use debt to acquire big-ticket items they need today, but that cost too much to pay for all at once. The vast majority of the population couldn’t afford a college education, vehicle, or home without financing them.
Credit cards or other forms of borrowing can make it easy to forget that you’re playing with real money. It can cause people to buy things they don’t really need or make purchases they can’t really afford. Don’t take on debt without giving it some serious thought first.
Debt has a way of spiraling out of control—fast. Before you know it, your payments can total more than you can comfortably pay and there’s no end in sight. Think a payday loan might fix the problem? Think again. These “short-term,” high-rate loans are the very definition of ugly. Avoid them at all costs.