Gather Little By Little wrote an excellent piece for this week’s Carnival of Debt Reduction called “Good Debt?? There Is No Such Thing” that I whole-heartedly agree with. What started LbL was an article on CNN Money That makes the rather “normal” assertation that debt can be labelled good as well as bad. As someone who has been both in debt and debt free, I can say with certainty that debt free is the way to go! It’s also what I am working my way back to!
LbL does differentiate between the degrees of bad debt: high interest unsecured debt (credit cards in particular) are the worst (baddest) of debt, with auto loans ranking as rather bad also … which I second! I’ve paid off the credit cards and the car note, now the truck note is the last one standing and also will be the longest to kill off.
Not-as-bad debt would be mortgages and student loans, as long as they are not abused. Yes, those can both be abused: Do I need to mention the current subprime mortgage meltdown? I have also heard of students using their student loans for living expenses as well as tuition and books, which inflates the amount borrowed.
Of course, the most questionable use of debt is to borrow to invest. I know, I know, you see it on PF blogs all the time: “Borrow money at a low interest rate to invest it for a much higher return.” I’ll say right now you won’t ever hear/read ME advocating that. It just doesn’t make sense to me, since no one can predict what investments will do. Up until this past year, real estate was supposedly a “sure thing,” as was the stock market. Sorry, but I would never go into debt for an investment (which is why I don’t yet own investment real estate) because even a rental property is NOT a sure thing.
Perhaps the most entertaining part of LittlebyLittle’s post is the myriad of comments and spinoff posts he has gotten on the subject, and yes this is yet another one LOL. It is a great debate in an intellectual way, but my gut agrees with the assertation that all debt is bad, and it is just a degree of evil to go into debt.