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There are. For example a home mortgage could be considered good if the interest rate is very low, 20% down, fixed rate and you plan to live there for a very long time (30+ years). It works good because of the tax situation and the inflation situation. You get to write off interest and over time inflation makes the mortgage easier to pay (because you are paying off the loan with money that is worth less than when you got the loan).
A student loan could also be considered a good debt especially if it increases your earning power and if you are able to get it subsidized. However that doesn't mean you should go overboard and go to a super expensive school. From my experience, the better the school doesn't necessarily translate into higher earning power.
You are right for the most part though, most debt is bad because it adds risk. For example in stock investing and credit cards (fees, risk of getting sued if you default).
geeezzz, Humanoid, you and I finally agree on something.
I would tend to call the other views (where folks think they are making bank on the margin) as rationalizations. Folks have lots of good explanations for all sorts of things, but that does not make them so.
I was almost tempted to call a debt that someone owes you a "good debt," for the sake of this discussion, but that is not really true, either.
I'm in the camp that says that there is no "good" debt. But there is debt that is less bad than others. Paying $10,000 a year interest to a bank just so you can pay $3000 less a year in taxes doesn't make a whole lot of sense. But a fixed rate mortgage on a house that is within the means of the purchaser is a good way to hedge your housing costs against inflation over the long term. But that is not nearly as good a hedge as owing your home 100%, since your only housing costs at that point will be maintenance and property taxes.
Student loans can be less bad if you are truly getting a degree that will allow you to get a well paying job. You also have to make sure you are minimizing the amount you borrow, and that there really is no other way to pay for school. It really isn't a sin to take six or seven years to finish a degree, especially if it means you don't have to borrow a dime to do it. It is far better to work you way through school than to use your future earnings to pay for today's ramen.
Example:
Mommy and Daddy give you a personal loan of $100k to get you started in life. They agree to ammortize the loan over 30 years at 0% interest. You decide that you don't have any urgent need for the money but put it in the bank in an online savings account earning 3.5%.
Your monthly payment each month will be $277.78
After you've made all of your monthly payments for 30 years you'd still be left with $108,309.
That's good debt!
If I can borrow $1 with a reasonable expectation of making $2 in another transaction, it's good debt.
There are such things as good and bad debts. Debt can be denominated in time, as well as money. A good debt, to me, is something like the US service academies. They provide you with a prestigious college education and exceptional leadership training. In exchange, you owe them time.
Example:
Mommy and Daddy give you a personal loan of $100k to get you started in life. They agree to ammortize the loan over 30 years at 0% interest. You decide that you don't have any urgent need for the money but put it in the bank in an online savings account earning 3.5%.
Your monthly payment each month will be $277.78
After you've made all of your monthly payments for 30 years you'd still be left with $108,309.
That's good debt!
If I can borrow $1 with a reasonable expectation of making $2 in another transaction, it's good debt.
But your relationship with your parents would change. To keep good, comfortable family relations you'd need to make sure you write that check every month. And every financial decision you make from that point forward would come with the implicit approval or disapproval of mom and dad.
There are a lot of people out there right now who are losing their homes because they borrowed money to leverage to make more money. A lot of people owe money they don't have because they spent the money on a bad investment. It sounds like a clever way to make money, but you're flirting with disaster if you borrow more than you can afford to pay back in cash if things go south.
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