The word ‘debt’ alone can stir up a feeling of dread in countless people across the globe. The thought of owing money to a company, corporation or bank can have us all quaking in our boots, but is debt always necessarily a bad thing? With anything from payday loans from companies such as Uncle Buck, to a full mortgage from a bank available for the taking, it can be difficult to see how all debt is bad when it’s so easily accessible today. Here, we’re taking a look into whether there is such a thing as good debt.
What Do We Mean By Good Debts?
‘Good debt’ is a term thrown around quite a lot in finance, but not necessarily with the same definition every time. From countless advertisements claiming that making money off of other people’s cash is good debt, we’re focusing more closely on another form of ‘good debt’ – Houses, student loans and businesses.
For the most part, you’ll want to avoid being in debt at all, but by taking out student loans in order to go to college and learn, this can often be classed as being a good debt. The theory behind these debts are that you’ll head out to college, get a worthy education, and then hop into a high-paying job so you can earn more than you’ll need to pay back. Of course, this is a dream to most, but it’s unfortunately not quite that simple anymore. Similarly, mortgages on a home may be worthwhile if you’re planning on remaining in that home until the day you kick the bucket, but for those waiting for the home to depreciate in value so they can sell on, this may not necessarily be possible. Business debt works in a similar way – you take out a loan for the business, hope that you start earning more money to pay off the loan and become rich! But, you guessed it, this doesn’t always happen.Continue Reading