There Is No Such Thing As ‘Good’ Debt

I’ve seen many sides of the debate on whether certain types of debt can be seen as good or not.  Obviously, from the title of my post you know where I stand on the issue, but let me explain why I feel that there is no such thing as good debt.

mb-checkbook201308Traditionally, debt gets categorized into good and bad debt.  Good debt has been identified as things like:

  • Mortgages – Good because you have a house to live in and (until the last few years) an asset that was more often than not worth more than what you owed on it.  Stability and comfort all played a role into identifying this as good
  • Student loan debt – Having a student loan most often meant that you went to college, which meant that you were able to increase your earnings potential, so student loan debt was often seen as an investment, so to speak, into future earnings. Positive investments are good, right?

I don’t disagree that those two items (and maybe others) have merits, but I still can’t see them as good debt no matter how you look at it.


One simple reason:

Debt in itself is not good.  Debt means that you owe somebody money.  Plain and simple, that sucks!

I might accept that those are ‘neutral’ debt or ‘OK’ debt, but the fact that I owe somebody money can never be classified in other things that I consider good, such as:

  • That’s a good looking Corvette!
  • I had a good time at your party.
  • Good dog!
  • You owe us some good money!

See how it kind of fell apart there at the end?  🙂

So, there’s my thought on why no debt can ever be good debt, no matter what good comes from it.  I’m not saying you should avoid it, because having a mortgage and getting an education might just be the best things you can do.  I’m just suggesting to separate the good part of that from the not so good debt that accompnies it.

What are your thoughts on ‘good’ debt?

7 thoughts on “There Is No Such Thing As ‘Good’ Debt”

  1. I may disagree with the term "good", but I would rather call it "better" instead. It is better because it may make you money, but it is still debt.

  2. Yes you are right, there is no such thing as good debt but we have to accept reality that most people have debts. It's part of our society already, part of our system. So whether it be good or bad, it's just how you handle your debts.

  3. I'd say there's debt that improves your life, and debt that can wreck your life. Going to college, despite the expense, was one of the best decisions that I made in life, despite the almost 20K in debt I graduated with. Buying a car on a loan was a poor decision that I regret. One got me farther in life, and one just cost me money for a depreciating asset.

  4. For me the definitions of good debt and bad debt can differ depending on who you ask.

    For example- bankers and other financial advisers define good debt as any debt that produces an income or cash flow and bad debt as any debt that reduces income or cash flow. So, under this definition the purchase of an apartment building would be considered a good debt while the purchase of a car would be considered a bad debt.

  5. Yes I agree with that, ultimately, if you could pay for everything with cash, that would be great. However, when you first get out of high school, can you pay cash for your college tuition? If so, can you then graduate college and immediately pay cash for a house? For most people, this would only be a fantasy.

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