Is There Such a Thing as Good Debt?


While it is very possible to live with no debt at all, it isn’t always the smartest thing to do. For most of us, the things that will get us into debt are homes, cars, and education, as there are few of us that can afford those things in cash. So you need to think that about the kind of debt that you are going to be getting yourself into; is it good debt or bad debt?

For example, good debt is debt that will allow you to get more money in the long-term and will help you to gain value. So debt for things like a home or debt for a college education can be classed as good debt because a house can be resold at the right time for a higher value. A college education makes you more employable, and student loans are generally the lowest interest loans that you can get. A mortgage does tend to be for a long time, around thirty years, but it does mean that you are paying back some relatively low payments, compared to a standard loan with sky-high interest rates.

Of course, there are always some things that you need quick money for. If you aren’t able to save too much money or have an emergency, then provided that you have a steady income to repay the debt, then it isn’t going to be classed as bad debt. Take a medical emergency, for example. How can you pay for it if you don’t have insurance? The same goes for things like bail money if you or a family member ends up in jail. Would you have that kind of money to pay the bail fee? As long as you have an income coming in to pay it back, then there are companies like Kat Bail Bonds to look at. The key point, though, is having money coming in to pay it back. The problem is taking out things like payday loans as a way to cover costs for other things that you can’t afford. Then it becomes bad debt as it just spirals out of control and you can’t pay it all back when you don’t have a steady income.

Bad debt can also be classed as getting money for things that will quickly lose their value. So think before you get a payday loan to pay for things. Is it for something like a vacation or just for day to day things? If it is, then it is going to be in the ‘bad debt’ pile. So think about if you really need it and can you afford to pay it back? By the time you’ve paid the interest, you need to think if it is going to be worth that extra amount. If it isn’t going to be worth the overall amount that you’ll pay, then just say no.

Overall, you need to plan to get out of any debt that you have as soon as possible. Look at your budget and make a plan for clearing it all. Some sacrifices will need to be made, but it will be worth it when the bad debt is cleared.


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