Many of us dream of getting out of debt. Perhaps you are one of them. The beauty and freedom of becoming debt-free, of not owing anything at all to anyone is an extremely alluring prospect, one that deserves serious thought and action.

All debt is not the same. There are some varieties which are terrible to have; some others are not so bad. So which is which?

It can be helpful to sort debts into one of three categories: consumption debt, use debt and investment debt.

Consumption Debt is debt acquired to spend, use up, without having residual value. A good example would be funds you borrow to have a vacation. You borrow the money, spend it on the vacation and afterwards there's nothing of hard cash value left. Oh, you may likely have some wonderful memories along with good feelings, but nothing that you could cash in

Most credit cards debt is consumption debt. The majority of personal credit card debt is bad. It's the costliest and most stressful type of debt to have, with high interest rates and charges as well as stringent repayment rules. If you are past due for a payment the terms can change and tighten up on you.

Consumption debt will be the worst form of debt to have. It is to be avoided, and when you have it, you should be paying off credit card debt first.

Use Debt is debt that you get with acquiring some thing to make use of, like a car, a truck, a boat or even an airplane, as an example. Use debt is normally secured by something of value but that is depreciating every month. It's not good, but may be essential to provide you with something to aid you to work or to transport oneself to work. It's bad, but not all that bad.

Investment Debt is financial debt you acquire during buying or having assets which will generate income or savings in the future. Good examples might be college loans that will help you get a university degree or maybe advanced degree, a home loan that lets you purchase a house, build equity instead of paying rent. Investment debt puts money-making or perhaps saving assets you can use under your control.

Investment debt, to acquire actual money-making resources could be almost a good thing. Better than doing without and not having the ability to make the income or save the money that the assets acquired can provide.

When you are paying off debt, you will want to pay off credit card debt first. Investment debts could be the last to be paid.

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