What makes debt 'good'?
Two things: a low interest rate, and an asset that tends to grow or generate income. A mortgage on a home, or a loan for a degree that meaningfully raises your earnings, can pay for itself over time. The borrowed money is working for you, not just funding consumption.
What makes debt 'bad'?
A high interest rate attached to something that loses value or leaves nothing behind. Credit card balances on everyday spending are the classic example: high cost, no lasting asset. The interest compounds against you while the thing you bought is already gone.
How do I decide before borrowing?
Ask: does this buy something that will likely be worth more or earn more later, and is the rate low enough that it's worth it? If yes, it may be good debt. If it's a high rate funding something disposable, that's the trap.
Questions
Frequently asked
Is a mortgage good debt?
Often yes: it's typically low-interest and buys an asset that can appreciate and that you'd otherwise pay rent for. It still has to fit your budget: good debt you can't afford is still a problem.
Is a car loan good debt or bad debt?
Usually it leans bad. A car loses value from the day you drive it away, so the loan is borrowing against something that shrinks. A modest loan at a low rate for a car you need to get to work is a different thing from a long, expensive loan for more car than the job requires.
