"Acceptable" & "Unacceptable" Debts
Only some debts are worth taking on.
"Acceptable Debts" are debts at low interest rates which you can tactfully use to increase your Savings Rate.
Examples of acceptable debts include:
- Mortgages on real estate investments
- Student loans to get marketable degrees
- Prime car loans you need in order to get to work
As long as they increase your Savings Rate, these can be left alone (within reason).
While these debts are not the worst thing in the world to have, they should never be accrued needlessly.
"Unacceptable Debts" are debts at high interest rates (15%+). These include:
- High interest debt from things like credit cards
- Subprime car loans, payday loans,
- Personal loans to friends or family
These debts do not benefit you at all.
Get rid of these debts as fast as you can.
Not all debts need to be eliminated from your financial position immediately, as some financial professionals would have you believe.
Acceptable debts can be left alone for now, so long as they increase your Savings Rate or Income.
Unacceptable debts should be cleared as fast as possible. The Debt Paydown Strategies page lists strategies for paying off these debts as quickly as possible.
Increase your Savings Rate