Is personal debt good?
Having debt isn’t always viewed in a positive light. This is mainly because accumulation of debt has often been regarded as something that doesn’t bring any value for consumers.
Good debts are those that will grow in value or generate long-term income. They can also be low-interest debts. For Vuyo, when he is paying his credit card off, one of the most challenging aspects is likely to be the high interest rates.
This is why credit cards are considered to be bad debts. For Vuyo, should he have a form of credit that comes with low interest rates, this should be considered to be good debt.
Is personal debt good?
Prior to applying for credit, Vuyo should consider that this type of debt is good when it is a sensible investment for his financial future. Ultimately it should not have a negative impact on his financial position.
As long as you have a specific reason for acquiring it, the debt is good. You should also have a realistic plan for paying it back.
If Vuyo is more interested in buying things that quickly lose value, this will qualify as a bad form of personal debt.
Mortgages
Buying a home is a positive investment because your home will increase in value.
Student loans
Student debt is considered a good type of debt. Furthering your education will have a positive effect for your career, which is likely to lead to improved finances.
Buying a car you can afford
Buying a new car when you can’t afford to, does not make any financial sense. On the other hand, buying a car that you can afford can be regarded a good form of personal debt.
Whenever you are asking yourself “is personal debt good?” keep in mind that good debt will pay off in the long run.