A conservative viewpoint is always to take on as little debt as possible. However, not all debt is bad and we don’t need to go all out to quickly pay off all debt. Recently, many financial gurus have been advocating taking on good debt and reducing bad debt. So what’s the difference between good debt and bad debt?
Good Debt versus Bad Debt
A simple explanation is that good debt will be able to increase your wealth, while bad debt is one that reduces your wealth. The easiest example of good debt which most people will take on is to use a housing loan to buy a house. By taking on a loan to buy a house, you are able to use only say 20% of the total amount to purchase the house. However, when the house appreciates over time, the appreciation will be on the entire amount hence ......