Comments on: Even Good Debt Can Be Bad

By: Top 135+ Personal Finance Posts for 2009 (That can be used 2010 and beyond)

Top 135+ Personal Finance Posts for 2009 (That can be used 2010 and beyond) — Mon, 28 Dec 2009 10:39:48 +0000

[...] Even Good Debt Can Be Bad Debt. We always hear about how some debt is “good.” But you can always have too much of a good thing. And that means even “good” debt can go bad. [...]

By: Brian

Brian — Fri, 30 Oct 2009 02:25:40 +0000

I think it’s important anytime someone takes out a loan, regardless of it’s purpose, to first plan out how they plan to pay for it when it comes time and analyze what assumptions are made (i.e. specific salary or accrued value) and whether these assumptions are safe or risky. Personally I just took out an auto loan and a student loan of about $2,000 each. Before taking these loans I first planned it such that the amount of the loans left me with a security net of about $1,000 in the bank, and can be payed of in the next 6-12 months by applying 20% of my monthly earnings to the auto loan until it is payed off and then the student loan until it is payed off. I feel it’s better to take longer in college and work part time as you go in order to both gain that work experience and not put yourself so far behind financially.

By: Benjamin J. Miller

Benjamin J. Miller — Thu, 29 Oct 2009 19:01:37 +0000

Overreaching or poor planning are indeed bad; debt enhances those situations by using leverage. The more debt you plan to use, the more carefully you need to plan.

By: Miranda

Miranda — Thu, 29 Oct 2009 17:23:50 +0000

You make a good point, Benjamin. It is nice when someone else pays off the debt. And these types of debt are acceptable. But, like home loans and education loans, if you overreach, the situation can turn ugly. And, of course, if you don’t have tenants or your business folds, things can become problematic. They key is to avoid taking on more than you handle. That’s when good debt becomes bad.

By: Benjamin J. Miller

Benjamin J. Miller — Thu, 29 Oct 2009 17:06:36 +0000

Interesting article, not exactly what I expected from the title. Although I agree that your house debt and education debt is better debt than perhaps a credit card loan or a car loan, the best debt of all (what I usually refer to as good debt) is debt paid by someone else. 2 easy examples of this would be business loans, or loans on rental property. When the business or the tenant is paying the loan for you, this in my opinion is good debt. Any debt can be dangerous, but without business loans and real estate loans much of our expansion would not be possible.

By: Wednesday’s Trends in Credit Cards & Your Debt | Credit Karma Blog

Wed, 28 Oct 2009 21:22:23 +0000

[...] you know that even good debt can be bad, blogs [...]

By: The Simple Dollar » The Simple Dollar Weekly Roundup: Third Child Edition

The Simple Dollar » The Simple Dollar Weekly Roundup: Third Child Edition — Wed, 28 Oct 2009 14:01:16 +0000

[...] Even Good Debt Can Be Bad All debt can be bad. I don’t necessarily believe in the “good debt versus bad debt” dichotomy, which is basically the argument of this article. (@ moolanomy) [...]

By: Toddriffic

Toddriffic — Mon, 26 Oct 2009 15:42:28 +0000

Nice post. My Fiance went to an expensive out of state public school, then Law school paid mostly with loans. Soon the repayment will begin and it’s going to take a good 30-40% of every paycheck. Ouch.

By: Miranda

Miranda — Mon, 26 Oct 2009 11:44:57 +0000

Thanks for stopping by, you two. It is true that a realistic analysis of whether or not debt is “worth it” is vital if you want to avoid letting it harm you financially.

By: kenyantykoon

kenyantykoon — Mon, 26 Oct 2009 08:38:28 +0000

this does make a lot of sense. to me good debt will, in the grand scheme of things help with your overall financial situation and this is all relative. for instance i dont think that all forms of education will help you get wealthier. lets say that a certain college degree will cost you $200k and after spending all that and more for the whole program you get a job where you get paid $2500 a month. in this case the ROI is not very good and if you took a loan to go back to school for that degree thinking that it was a good debt, it would rapidly escalate into a bad one. so i think that one should do a lot of research in before getting into any type of debt because as you say “it is still debt” and as long as you have it, you are still enslaved to your creditor