Good Debt vs Bad Debt
A distinction between borrowing that can build wealth and borrowing that drains it.
Good debt is borrowing at a reasonable cost for something that may increase in value or income, while bad debt is high-interest borrowing for depreciating or consumable purchases. The labels are simplifications, but they help prioritise which debts to avoid or repay first.
Examples
- High-interest credit-card balances are often cited as classic bad debt.