Good Debt: Don't panic when you hear the word debt! This is how good debt can change your destiny..

Generally, the mere mention of debt or loan brings a wave of worry to the mind of the average person. We've always been taught that debt is a burden and it's best to avoid it. But is this the truth? Not all debt traps you in a financial trap. Financial experts believe that, if used wisely, debt can become a major source of financial progress. Yes, debt can even help you become rich. It all depends on whether you're taking out good debt or bad debt. Today, we'll unravel this mystery: what good debt really is and how it helps increase your wealth.

These loans don't sink you, but rather make you rich.
First, it's important to understand the fine line between 'good debt' and 'bad debt.' Simply put, 'bad debt' is what you spend on things whose value depreciates over time, such as an expensive car, the latest gadgets, or a personal loan for a vacation. This only increases your liabilities.

In contrast, 'good debt' is an investment. It's money you invest in something that will either earn you more money in the future or appreciate over time. This builds your assets.

The most accurate and excellent example of this is an 'education loan,' i.e., a loan taken for education. While pursuing higher education or a professional course from a prestigious institution may be expensive, the loan provides you with better skills and qualifications. This can help you secure a good job or a better source of income in the future. This is an investment that multiplies your earning potential.

A 'home loan' also falls in this category. Although a home loan lasts for decades and seems like a significant responsibility, there are strong reasons to consider it a "good debt." The home you're paying EMIs for is a physical asset. Over time, the value of that asset is almost guaranteed to increase. It's not like paying rent, which is simply an expense. With a home loan, you gradually build a significant amount of capital.

The "right loan" helps here, too.
"Good debt" plays an important role not just for education or housing, but also in the business world. "Business loans" also fall into this category. If an entrepreneur takes out a loan to expand their business, purchase new technology or machinery, or stock more goods, it's a wise move.

This additional capital increases the business's profits and strengthens its market presence. In this way, the profits earned from the loan far exceed the cost (interest) of the loan. Even personal loans can be beneficial under certain circumstances. For example, if you take out a loan for home repairs or renovations, it directly increases the value of your asset (home). Similarly, a loan for an emergency medical expense protects your health and quality of life, which are your greatest assets.

Benefits of 'Good Debt'
Good debt is defined not only by its purpose but also by its terms. Generally, 'good debt', such as home loans or education loans, is available at lower interest rates than 'bad debt' (such as credit card loans). This is because they are often secured by an asset (such as a home) or future earnings (such as a degree).

Furthermore, the government encourages this type of debt. Income tax deductions are available on both the principal and interest of home loans. Similarly, you can also claim tax deductions on the interest on education loans. This provides double savings.

It has another major benefit that's often overlooked: it improves your credit score. When you take out a large loan (like a home loan) and make disciplined, timely payments, it strengthens your financial standing. A good credit score can help you secure other important loans in the future with ease and better terms.

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