Firstly, lets dig into what good debt is & what bad debt is:
You can say that the debt you take on is “positive” if it enables you to earn money and increase your net worth. Debt that significantly enhances the lives of you and your family in other ways is also acceptable. In a variety of circumstances, taking on debt may be advantageous to your overall financial situation. Examples of good debt include: education, a business & a home.
Bad debt is generally considered money you are borrowing to purchase a depreciating asset.
Debt that is not healthy for your finances typically carries a high interest rate. Carrying too much debt can negatively affect your credit score. If you use too much of a revolving line of credit, like charging up to the maximum on your credit card, then your credit score will suffer. Examples of bad debt includes: cars, clothes & consumables, basically luxury items that are not necessarily beneficial or financial growth.
The bottom line is…
Debts are not created equal. While bad debt costs you money with high interest on purchases for depreciating assets, good debt can potentially increase your wealth.
Sometimes a person’s financial situation, including how much they can afford to lose, determines whether a debt is good or bad. To review your debt situation and your options for managing it, think about speaking with a qualified financial advisor.