What debt are considered a good debt ?

Agung

What debt are considered a good debt ?

DestroyingAngel_2

The answer is: NO DEBT.

[Deleted User]

A debt on an appreciating assest isn't a bad thing (e.g. a house.. assuming houses rise in value)

A debt on something that is considered a long term investment (e.g. a business).. that's not bad either

Not all debt is bad

exel1966

Stoozed credit card debt is good to a degree.

Any debt you can manage well could be considered as good, any debt mis-managed would be bad. For the majority debt is part n parcel of life, it's all down to the way you handle it.

bethanyrayne

Agung wrote: »

What debt are considered a good debt ?

I always tell my children;
Only borrow money to make money and never borrow to buy luxuries you can't afford.

NickX

Agung wrote: »

What debt are considered a good debt ?

The cheaper the debt the better it is.

0% debt is definitely good debt.

If you can make a higher return on the funds than the debt is costing to service then it is good debt. This would include stoozed funds, and possible investment in property (i.e. mortgage debt) although with the current climate you may need to be careful on the property side.

I would actually go as far to say that as long as you understand what the debt is going to cost you and you can manage it effectively then it is good debt.

It is when debt gets out of control that it becomes bad debt.

NickX

bethanyrayne wrote: »

Only lend money to make money and never lend to buy luxurys you can't afford.

I think you mean "borrow" as opposed to "lend" unless you do mean being the creditor rather than the debtor.

Regarding borrowing to buy luxuries that you can't afford, I don't really agree. If there is a car that you really really want and the manufacturer is offering 0% finance, then why wait to save up for it when you can buy it now and rather put the money into savings for the car you simply pay of the 0% finance, and you benefit from getting the luxury good sooner rather then later.

sdooley

There are other ways debt can make you more money than it costs. The classic is where you take a job which requires you to have a car. Buying a car on finance, even though it will lose value over time, will be a good investment because it helps you earn the money to clear the debt and more. Similarly student loans (if the degree will help you earn).

When I worked for a finance company, the only thing we wouldn't lend for over a year on was a holiday. Says something about the risk/reward profile of someone borrowing for that.

talana

What debt are considered a good debt ?

Apart from those who are especially rich, most of us will have some debts at some point in our lives (eg mortgages, student loans, credit cards etc). So the mantra:

Only lend (borrow) money to make money and never lend (borrow) to buy luxurys you can't afford.

is simply unrealistic unless you never want to buy a house, study at university, buy a car etc.

The first questions you need to ask:

- Do I know how much the debt is going to cost me? Can I manage it effectively?
Do I have some sort of Payment Protection (if appropriate)?

Secondly, what have I gained in exchange for having this debt? If you can point to something concrete that you've used the money for that is to your long-term advantage(buying a house, putting yourself through college, renovating the house, buying a car needed for work etc) then I would call that "good" debt.
If though the money has just gone on random spending (clothes, holidays, other outgoings because you're overspending) and you have nothing really to show for it, then that's "bad" debt in my book.

bethanyrayne

NickX wrote: »

I think you mean "borrow" as opposed to "lend" unless you do mean being the creditor rather than the debtor.

Regarding borrowing to buy luxuries that you can't afford, I don't really agree. If there is a car that you really really want and the manufacturer is offering 0% finance, then why wait to save up for it when you can buy it now and rather put the money into savings for the car you simply pay of the 0% finance, and you benefit from getting the luxury good sooner rather then later.

Thanks, edited.

nomoneytoday

Agung wrote: »

What debts are considered a good debt ?

I would say Student loans as they are investments in the person, mortgages as investment in bricks and mortar, and obviously money spent on a Ferrari or Lamborghini is a fantastic use of resources