Good debt is often considered to be an investment in something that creates value or income. A mortgage or student loan, for example, can be considered good debt - especially if your home's market value increases over time, or your education helps you land a good job that pays the bills.
In general bad debt is any debt you take on to fund a lifestyle you can't afford, and it usually causes you to sacrifice long-term financial health for short-term gratification.
Debt that uses up too much of your available credit can also be considered bad debt.
How do you turn bad debt into good debt? To get your loan under control and to improve your creditworthiness, consider minimising the amount of new debt you take on, while you work on paying off the debt you currently have.
In addition, responsibly using the credit you've already been extended and applying for new credit only when necessary can help you show lenders (and ratepayers) that you are a credit-worthy organisation.
You can't improve your credit history overnight, but if you create a budget to pay down your debt - and you stick to it - your bad debt may start to look like good debt.
You don't want to borrow heavily now, so it becomes a burden on future generations, so as to use up all the inter-generational equity (when you've spent beyond your means and there is no more equity left to borrow against).
TRACEY McLEOD
Lake Tarawera
