differences between the good and bad debt Debt in and of itself is not a bad thing. Both of us were able to start our own businesses because of debt; Steve began his own law practice, and Azriela began her own entrepreneurial consulting business. So we understand what debt is and why some debt is great debt. Debt that helps you, enriches your life, is manageable, and is not a burden can be called good debt. For example, student loans are good debt if they enabled you to get through school and further your life goals. They are bad debt if you dropped out of medical school after one year to become a writer. A good debt helps; a bad debt hinders.
My personal viewpoint: Good debt: Good debt is any debt that increases your earning power or makes money for you. Student loans and small business loans fall into this category. A mortgage is good debt because real estate values increase long-term. Bad debt: carrying a balance on credit cards; consumer loans. Auto loans fall into this category, although they are a necessary evil for most of us. "Those who understand compound interest are destined to collect it. Those who don't are doomed to pay it."
Not necessarily. As others have said, it depends on the type of debt and what it's used for. I wouldn't even make the blanket statement that carrying a balance on a credit card is bad debt. For example, I have a credit card that offered me balance transfers at .99% until paid (with no transfer fee, even). I maxed the card, and I'll never pay more than the minimum payment. Why? Because there are many places that I can make more than .99% on my money, which means when I subtract the cost (.99% interest) from the gain (even a good money market can pay 3-4%), I come out ahead. That's the true test--is the debt helping you to build wealth? If the answer is yes, then it's good debt.
