Debt, your worst enemy

There is a right way and a wrong way for a person to use debt. And if used the wrong way, debt can be a person's worst enemy, financially speaking.

What is debt?

There are actually two kinds of debt, good debt and bad debt. Good debts are things such as a mortgage loan, student loans, business loans, and real estate loans. While these types of debt still mean a person owes money and that they are required to pay back the loans, these debts are investments that will create value. When a person takes out student loans they are getting an education and will likely be able to get a better job and make more money than if they did not go to school. And houses and real estate generally go up in value over time.

When a person uses a credit card to buy clothes, shoes, food, etc., and instead of paying the full amount to pay off the credit card each month, they only pay the minimum payment, they have bad debt. The clothes, food, shoes, etc., that they have purchased with their credit card have gone down in value the second they walk out of the store, but the amount that they owe on their debt continues to increase until they pay it off.

Why debt is an enemy

There are several reasons why debt is a person's enemy. Debt allows people to purchase things without having the money. This can be a good thing when it comes to investing in something that will eventually make the person some money. But when a person uses "fake" money to purchase things that depreciate in value, they are worse off than if they wouldn't have purchased anything in the first place.

And while bad debt is worse to have than good debt, both good and bad debt can become a person's worst enemy if they do not pay off their debt. Lenders expect borrower to pay back the money that they borrowed, and if they don't there are consequences. These consequences can affect a person's life for many years.

Debt and stress

Most people who have debt are aware that debt and stress go together. A person with any type of debt, good, or bad debt, has to make payments. This means that they have to remember when they need to pay, how much they need to pay, and they have to figure out where they will get the money to make their payment.

While the internet has made it easier to make debt payments, it can still be hard for some people to actually get the money to make the payment. And if a person misses a payment, well, that's even more stress. Then they have to be worried about how missing the payment(s) will affect their credit score.

Debt and your credit score

A person's credit score is kind of a magic number. A credit score allows a lender to know if a person has been able to pay off their previous debt on time essentially showing whether or not the person is responsible with money.

If the credit score shows that a person has been able to pay off their previous debt and has been responsible with the amount of debt they had been given before, the person will likely be allowed to borrow money from the lender to purchase a house, or a car, etc. But if a person has a bad credit score, the lender will think twice-or won't give them a second thought-before lending any money to the person.