To most people there’s no such a thing as a good debt. This is because our parents told us that any kind of debt is bad. So, if there is a bad debt and a good debt how would we know which debt is good and which is bad?
A bad debt is simply the one you cannot afford to pay back. A good debt is the one that would increase and accelerate (leverage) your profit. Moreover the rate of return extracted from the money you acquired in a form of debt should be more than the interest rate incurred and payable on the debt, to make it a good debt.
For example, if you borrow x amount of money at the interest rate of y% per annum, then whatever investment you use x amount on should yield at least y% return, to make this x amount a good debt.
Borrowing for consumption (e.g. buying private car on credit) is less profitable than borrowing for investment (e.g. buying a business car on credit).
The sad thing about debt is that, it has to be paid back. It is said that in South Africa, in 2014, 76% of the household income is spent on servicing debt, on average. This would be good if most of this debt was a good debt, for both the credit providers (that is, it is 100% recoverable) and debtors (that is, the ‘return on debt’ is at least equal to the total costs of debt)
Think before you borrow. Good debt makes you more money, bad debt get you spend your tomorrow today.
‘Good debt makes you richer, bad debt makes you poorer’ Robert K.
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Disclaimer: This is just my opinion and am not a qualified financial adviser. Seek the professional advice before making any decision about money.