 TITLE: Knowing What Debts to Avoid When Managing Your Finances CONTENT: What Is Considered Bad Debt?\n----------------------------\nDistinguishing bad debt from good debt isn't always so black and white. In general, bad debt is any type of debt that doesn't increase your net worth. But even good debt can go bad if you can't pay it off or if the payments start eating up too much of your income. (Find out how much your debt-to-income ratio should be.)\nYour financial habits also affect whether debt is good, bad or neither. If you can put all your household spending on a credit card, earn lots of rewards for that spending and pay the balance off in full every month, that debt will have a positive effect on your credit and overall finances. If you spend beyond your means, pay just the minimum each month and rack up interest costs, your debt is doing more harm than good.\nThat said, some types of debt are bad news from the get-go. This debt may carry very high interest rates or have unrealistic payment schedules. These include:\n*   **Payday loans**: When you're in a cash crunch, these emergency loans can offer a way to tide you over until payday. But they have extremely high interest rates and fees, and you typically have to pay back the loan in full on your next payday. If you can't do that, interest on the loan keeps accruing. A payday loan quickly can lead to a vicious circle where you owe your paycheck to the payday lender before you even get paid.\n*   **Car title loans**: Title lenders use your paid-off car as collateral. You'll get cash fast, but you'll have to sign over your car title to the lender and you won't get it back until the loan is paid in full. Because title loans charge high fees and interest rates, you can easily find yourself getting deeper and deeper in debt and never be able to get your car back. Find out more about title loans. END