Comments on: Good Debt?? There is No Such Thing

By: Garen

Garen — Sun, 01 May 2011 17:32:55 +0000

Yes, having debts are bad and some may be even worst than most as you clearly pointed out in your article but Iíd rather see things in a positive light.
This means for people who may be at one point in their lives financially challenge due to a mixture of circumstances and unwise decisions seeing things in their right perspective can attract a solution to the problem rather than wallow in self pity or unending remorse and regrets for what ifs. Home mortgage may be categorize as your present debt but in the long run you will gain something; your own home in the future.

For those who have debts because they are starting on a business which by the way does not instantly gave you a return of investment (not unless after a few months of successful selling) then this may be bad debt at first glance but ultimately it is better to be the boss than merely being the employee so taking the risks may be beneficial.

Education loans may be bad debt now but in the future if you are armed with the right skills and knowledge then you still win in more ways than one.

By: Damien Barber

Damien Barber — Wed, 07 Apr 2010 10:33:04 +0000

Hey, I know this is years after this post, but I thought you might be interested in checking out my latest blog post

http://barbersblog.spaces.live.com/blog/cns!8DDE0E8AAFE427F5!216.entry

I have a similar view to you, except that I do consider Student Loans to be “good” debt (to a certain degree) because it is an investment. You may be spending 20-30k to get your degree, but then you can usually turn around and pay that off in a couple years once you are making $30-60K (or more depending on your degree).. prior to getting the college education you would have been stuck earning $15-20K for the rest of your life or until you could slowly save up to go to college… in such a case taking on debt is better than the alternative and leads to you earning more money quicker!

As far as mortgages go, I see them as good debt so long as you stick to a house that can be paid off in $10-15 years (I did the math and discovered that a 30 year mortgage will lead you to pay DOUBLE the amount your house is worth as the Interest would match the cost of the house itself).

However, I myself plan not even to use this debt as I figure I can rent for about the same cost or less over 10 years as the interest would cost me towards my house while saving up the money to buy the house… and I would not have to worry about property tax or maintenance costs/ homeowner’s insurance during all this time (making renting cheaper than the interest and other cost).

So I disagree with the person that said a person cannot save up money to buy a house as you can rent for approximately the price of interest on a house (at least if you don’t require a lavish house/ apartment that’s gonna cost you $900/mo in rent).

I also see no interest store credit cards as “good debt” so long as you use them sparingly and have a plan to pay them off before the no interest period wears out. I used this kind of debt to get my wife’s engagement and wedding rings, and paid them off shortly after we got married to avoid any fees.

Car loans, I see as neutral and can vary depending on circumstances as to whether you should take on such debt. Pretty much any other debt I see as Bad to Super Bad.

By: Make Friends, Earn Money

Make Friends, Earn Money — Mon, 23 Jun 2008 18:55:08 +0000

I agree that there is no such thing as good debt, but there is such a thing as necessary debt, a mortgage for example. I think the key here is being wise about what type of debt we take on and not borrowing beyond what we know we can sensibly manage to afford. I also agree that borrowing to invest is a big no no.

By: David Makes Cents

David Makes Cents — Fri, 14 Mar 2008 01:55:51 +0000

Sweet you paid for your own college too. I feel like I am the only one I know who has to do that. Every1 elses parents seem to pay for it. Or they are just taking out loans. I now have a higher level of respect for you. :)

I disagree, there is good debt. I would take $1,000,000 at 1% interest then just put it in the bank and get money off the difference. I know this is kinda silly, but hypothetically it is good debt. Some people actually make money like this by using 0% apr intro rates on cc and then paying it off when the intro rate expires. Its called credit card arbitrage. Its a little risky but some peeps make a few thousand a year from doing it.

By: Peer-to-Peer Lending and Bloggers Ethic | Moolanomy

Peer-to-Peer Lending and Bloggers Ethic | Moolanomy — Mon, 10 Mar 2008 13:03:15 +0000

[...] bad because it propagates myriad problems caused by credit and debt. In his words: “I’m not a fan of borrowing money and couldn’t in good conscience recommend these services to my readers. I’m a firm [...]

By: glblguy

glblguy — Thu, 20 Sep 2007 20:37:31 +0000

@Justin – I see what you are saying and see how it could work, but your point about paying on time is important and not something people in general are real disciplined on. I think Jon’s comment really backs up what you are saying.

@Jon – Great points Jon, and I do believe you bring a really interesting and good perspective. For me, this wouldn’t be something I would want to do, but I can see the attraction and how if you know what you are doing it could be a good investment. Thanks for taking the time to write such an excellent comment. Thanks also for the comment on the site, I appreciate it.

By: Jon - Art of Money

Jon - Art of Money — Thu, 20 Sep 2007 17:46:51 +0000

Thanks glblgy, nice site. I agree that a lot go broke, that is because they are gambling, not investing. An investor takes the time to get properly educated, studies every investment thoroughly and then factors all possible risks into an analysis if the investment. If the numbers make sense, including the risk factors, then debt or no debt it is a deal that is worth doing.
There are risky investments, but most of the time it is the so called investor that is the real risk.
Two nights ago in my investment club we had a proposal from a CEO of company with annual profits of 500 million dollars (the CEO was there in person). The company is a world leader in their business and the industry sector is extremely stable. He was offering a two year corporate bond that paid 14-16% annual return, paid monthly. In ten years of doing business, they have never missed a monthly payment or failed to return the investor’s capital.
I have 2 credit cards offers on my desk that will allow me to borrow the $25,000 @ 6.5% for 2 years. By my calculations I can make about $200 a month for two years by doing nothing. I like deals like this and I find them a lot less risky than having a job, for example. The risks of having a job are many, primarily to your health and sanity :) but high tax rates and layoffs or outsourcing are also risks that employees face.
Anyways, good post, excellent point of discussion. I just wanted to present an alternative view, which I realize is not for everyone. I have seen many times first hand that debt used as leverage, combined with financial education can lead to financial freedom. To me money is really a game, and even going broke is part of the game and not really to be dreaded. You can go broke, and I have come very close, and it is not the end of the world. Often people who have gone broke have a new appreciation of money and go on to do very well.

By: Justin

Justin — Thu, 20 Sep 2007 16:49:45 +0000

@glblguy said: What you arenÂ’t factoring in is the risk.

I don’t think the risk in these cases is very high. If you are guaranteed zero percent interest rate for a certain period and you can get more than that in a savings account that is FDIC insured, the risk is very minimal. You just need to pay your bills on time. You always have the principal to pay it back should issues arise.

By: glblguy

glblguy — Thu, 20 Sep 2007 16:40:42 +0000

Jon, thanks for stopping by. I know people do it, and you can make money, but I disagree it’s good debt.

What you aren’t factoring in is the risk. I would also question any circumstance where you are “guaranteed” a return.

While it might be how some people get wealthy, I would argue many more go broke than get rich.

Really boils down to what you are comfortable with, and I just wouldn’t do it. But I am a low risk person, just learned that being risky generally more painful than rewarding.

By: Jon - Art of Money

Jon - Art of Money — Thu, 20 Sep 2007 04:14:58 +0000

I’m dating myself here, but a good number of years ago when banks were paying 14% interest, my sister in law who was going to college borrowed every penny she could in interest free student loans. Took the money and put it into a bank account. By her second year she was able to live off of the interest without touching the principle. After she graduated she paid the principle back, just before the interest free period expired.
Good Debt!
There are many circumstance where I can borrow at one rate and through financial skill and knowledge be guaranteed a return higher than the interest payments. That is not only good debt, it is the way rich people get wealthy in many cases.