Good debt and bad debt

I am sure you have heard that there is good debt and bad debt. However, all debt should be considered bad. There is no such thing as good debt. Debt is debt.

Pay to all what is owed to them: taxes to whom taxes are owed, revenue to whom revenue is owed, respect to whom respect is owed, honor to whom honor is owed. Owe no one anything, except to love each other, for the one who loves another has fulfilled the law. – Romans 13:7-8

Scripture tells us to owe no one. This means that we should have no debt. Today, we are told that mortgage debt is good debt and credit card debt is bad debt. If you owe anything, you are in bondage. This is why no debt should be considered good. Perhaps, we should think about debt in varying degrees of badness. The top bad debt should be student loan debt. You must be quick to rid yourself of this debt and any other debt.

My son, if you have put up security for your neighbor, if you have shaken hands in pledge for a stranger, you have been trapped by what you said, ensnared by the words of your mouth. So do this, my son, to free yourself, since you have fallen into your neighbor’s hands: Go—to the point of exhaustion — and give your neighbor no rest! Allow no sleep to your eyes, no slumber to your eyelids. Free yourself, like a gazelle from the hand of the hunter, like a bird from the snare of the fowler. – Proverbs 6:1-13

Student loan debt burdens you and whomever co-signed for you. Even your death does not free your co-signers. Should you die before you pay it off, they will go after your co-signers for repayment. Student loan debt is not dischargeable in bankruptcy. This is why it is the top of bad debt. Next, are payday loan and, title car loans. These are bad because of the high interest rates that they charge. If you have these, pay them off quickly. Otherwise, they will keep growing and growing. Yes, these are dischargeable in bankruptcy, but you should repay the money if you borrowed the money. The best thing to do is to avoid this debt like the plague. It is really a debt plague. You don’t want it.

The next bad debt is credit card debt and other unsecured debt. You need to pay this off to avoid it growing and consuming your paycheck. If you have credit card debt, you need to start attacking it.  You should address all your debt by using the debt list and the debt worksheet. They show you how to begin to pay off your debt. Prepare a monthly money blueprint, so you’ll know exactly how much money you have available to pay off your debt.

The last bad debt is your home mortgage. The reason this is called good debt is because homes tend to go up in value. However, this is not always the case and you can end-up upside on your mortgage. Remember when you are buying a home, you want to be able to put down 20% or more. You want to finance it for no more than 15 years. You also do not want it to consume more than 35% of your net income. The 35% includes not only the mortgage payment, interest, and taxes, but home maintenance and repairs. Once you buy a home, all the repairs are yours. Appliances, roofs, flooring, painting, etc. don’t last forever. You have to budget for these items, so they won’t break you. Remember, there is no good debt. All debt is bad just in varying degrees.


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