by Barry Williams

Created on: December 11, 2009   Last Updated: December 12, 2009

Call me old fashioned if you like but any debt is bad in my humble opinion.  Debt is like a bad smell that never seems to go away. No matter how  much money you pour into your debt,  it never seems to have any effect.  Why on earth would you call a millstone around your neck a good debt?  The only good debt is one in which you look at your statement and, after what seems like an eternity, you finally see a zero balance. 

Feel sorry for young couples who borrow three hundred thousand dollars over thirty years to buy or build a house on a block of land where the house is sandwiched leaving just enough space for a lawn to be mowed with a pair of scissors.  Oh yes that is a good debt. Money well spent even. Money not wasted on frivolous things like an overseas holiday or a piece of steak once a month.  Thirty years will pass in no time. The dedicated couple - if they decide to put off having children until they turn fifty  and live as if Scrooge was their  financial adviser - may even have the debt paid off in twenty two years.  Call that a good debt? Well if they didn't default once and paid the whole debt back then it was a good debt. Good for whom though? Why, the lender of course. The C.E.O. has to be paid somehow. If you really want a surprise then work out how much interest you would pay on a loan of  three hundred thousand dollars over thirty years and then you will  see why  the C.E.O can be paid so much.

No one would argue that debt employed to acquire a house is a bad debt.  For most people it is the only way in which  they can purchase a house.  The house buyers however would argue that  a debt incurred to purchase an overseas holiday is a bad debt.  Even incurring debt to purchase a car would be a bad debt.  They see an overseas holiday as a waste of money . After the holiday what does the person own apart from stories to tell and a few photographs that no one really wants to see. As for a car well that's money buying an asset which  loses value year after year. 

I suppose really  the difference between a bad debt and a good debt  depends entirely on the individual.  The person who goes into debt to pay for a overseas holiday  ends up with precious memories, which he or she may consider priceless. The person who goes into debt  may consider a car purchase the fulfillment of a dream to own the best he

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