Is a Little Debt a Good Thing?

Is a Little Debt a Good Thing?

Under the right circumstances, taking on debt can positively affect your finances. The secret is in knowing the difference between good debt and bad debt. 

Good debt is debt used to finance something that will create value. One example of good debt is a student loan because an advanced degree can improve your future earnings. 

Another example of good debt is a home mortgage. When you’ve paid the loan off in 15, 20 or 30 years, the home could be worth much more than the purchase price.

While good debt is a type of investment, bad debt is financing something that won’t go up in value or generate income.

Cars, clothes, and consumables are examples of bad debt - it’s better to pay cash for what you need than to pay interest fees on these items.

Probably the worst kind of debt is credit card debt, especially if you don’t pay your balance in full. You’re charged interest on the outstanding amount and it’s typically a higher rate than on any consumer loan.

However, if you pay off your credit cards each month, it can help you to establish a good credit rating for future purchases like a home - just never take on more debt than you can afford.

For more information about how to handle credit and debt, please give us a call today.


  • Phone:
  • E-Mail:
    This email address is being protected from spambots. You need JavaScript enabled to view it.

Check us out

© CHARLES CARROLL FINANCIAL PARTNERS. All rights reserved. Powered by AdvisorFlex.

The information presented on this website is for information on matters of interest only. Given changing laws, rules and regulations, there may be delays, omissions or inaccuracies in information contained on this website. The information in this website is provided with the understanding that the authors and publishers are not herein engaged in rendering legal, accounting, tax, or other professional advice and services. Before making any financial decision, you should consult one of the Charles Carroll advisors. Every effort has been taken to see that the information contained on this website is accurate. Charles Carroll in not responsible for any errors or omissions, or for the results obtained from the use of this information. Charles Carroll and its employees are not liable to you or anyone else for a decision made or action taken based on the information on this website