Good Debt, Bad Debt

Debt has a terrible reputation, and much of it is earned — but the blanket rule "all debt is bad" is wrong enough to be expensive. The useful question is never "is this debt?" but "what does this debt buy, and at what cost?"

A rough working definition: good debt finances something that grows in value or grows your income. Bad debt finances consumption at high interest — the thing is gone or shrinking while the payments continue.

Study loans that raise lifetime earnings, and home financing on a property you can genuinely afford, usually sit on the good end. A reasonable car loan is in the middle — cars lose value, but if the car earns your commute, it is a cost of income. Credit card balances carried month to month, personal loans for holidays, and buy-now-pay-later stacks for wants sit firmly at the bad end: interest rates of 15–18% on things worth less every day.

Before borrowing, ask: (1) Will what I am buying still be worth something — financially or in earning power — when the loan is finished? (2) Can I afford the repayment even in a bad month, not just a good one? Two yes answers: proceed with eyes open. One no: pause. Two no answers: that is not financing, that is a slow-motion problem. Run any loan through our Loan Calculator to see its true total cost first.