We consider school loans bad debt. If you finish school, get a good high paying job and then attack loan like mad, a school loan may work out. The problem is that there are too many things that can go wrong. At best, even if you do graduate and get a good job there are always a lot of other expenses at this time in ones life. You are really behind financially when you start your working life in debt.

Auto loans are bad loans that have become common practice to us. We pay interest on a vehicle that will only be worth one half of its original purchase price in five years. Lately it has also been common for us to borrow more than a vehicle is worth. We can trade a car in that we still owe on, and roll that owed amount over into another vehicle. This gives us a loan amount that is higher than value of car that we drive away. We have lost our capacity to say NO.

Co-signing is a bad debt that usually and unfortunately involves family. If someone cannot qualify for a loan at a regular lending institution, they should not get a loan. The fact that they can't qualify for a loan elsewhere should tell you that they are a huge risk. Use this opportunity to teach them how they can get what they want by working harder for it and delaying purchase.

If you want to get off of debt treadmill, you must run as far away from debt as you can. You cannot use debt to get out of debt. Even if you do, you have not changed your habits; you must change your lifestyle.

2. Find a seller who is motivated to pay closing costs or carryback a percentage of loan - If you find a seller who is really motivated to work with you, that may help you get approved with a lender. If seller can pay your closing costs, this can free up that money so that you may have a small down payment. If seller is willing to carryback a percentage of loan then loan-to-value may be low enough that lender may consider that as good as a down payment. If seller is motivated to work with you, they may be willing to work through a down payment assistance program to help you make a down payment. It is illegal for a seller to give you down payment for their house, but through down payment assistance programs like Neighborhood Gold and Nehemiah program, it is totally legal.

3. Borrow or ask for a gift from relatives toward a down payment - After you have financed house, you can usually take out a 2nd or 3rd mortgage up to full value of your house, and then you would be able to repay relatives. Keep in mind that if you intend money to be as a loan only from relatives, you would need to disclose that to lender before you close. Lenders usually have regulations about where down payment is coming from and if you are not honest, it could be considered defrauding a lender.

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