Is there a particular reason why it's "good" to be in debt?

Question

I learning about all these credit card companies who don't like customers who have no debt. Is it better to be in debt or not?

Answer 1

There are only two types of good personal debt. The first is School Loans. You will always have far greater returns from a good education than you will pay in interest rate. The second type of good debt is when buying a home. In general the home will increase in value faster than what you are paying in interest.

Other than these two types of debt, there is no other debt that is good. Not credit card, not automobile, not personal loans, none!

I have been down this road before and as an MBA, I can tell you that nothing will make your Net Worth decrease faster than credit card debt and/or auto debt. These are the most popular ways to borrow money on a depreciating asset and is the number one way that poor people stay poor.

Thus, if you need credit to buy a home then go to school. Take out a couple of student loans. Graduate and get a job. Stay in your job for at least two years. Pay off the student loans. Save and invest until you have around a 20% down payment and there isn't a bank in the land that will refuse to give you a loan at a decent interest rate. Once you are in the home for a couple of years and plan to stay there for at least 5 more years then you can refinance to a lower rate.

There isn't anyone here that can dispute this plan as my wife and I did the very same thing. We had credit card debt for years. Paid it off and now keep our credit card balance at zero (yes there's only one card). We've saved and invested and now pay cash for cars and put a large downpayment on a home. No other credit was needed. I have a net worth that is climbing every day and this looks good to the banks as I am a much lower risk customer than someone with credit card debt.

Good Luck!!!

Answer 2

Ideally, we'd all be so wealthy that we wouldn't need to borrow. But most of us only dream about that.

Many people on this website are preoccupied with borrowing to establish a credit score. I don't agree with that approach.

But if you need to buy a car or a house or a college education, then it the kind of thing that costs more than a year's savings, then borrow and pay it back over time. Certainly the tax deductibility of home mortgages makes that a great deal for every American.

Debt can allow you to live better than your current income allows, but many Americans take it too far.

Answer 3

it is good to have debt but the interest that you are paying should be just 10 times lesser then what you are making.

If you have debt then your track record should be excellent as paymaster cause then the credit company will be running after you for more offers.

when you hve debt then you are more agile as you have to pay your debt and that makes you do better in your business.
Because if you dont have any debt human tends to be complacent

Answer 4

Not good to have debt, good to have a track record paying off debt.

The best is to have a record of taking loans and paying them back with no late payments. But if you owe too much, or even have too much credit available to you, banks will be less willing to loan you more.

Answer 5

Your accounts should be open and active. If you owe nothing, you won't have credit to speak of. You want good credit, which involves paying on time, but to have credit at all you need to have active accounts on which you are using the credit card company's money.

Answer 6

Creditors like to see a payment history. If you don't have debt, you don't have a history. They want to be able to tell how well you've paid your bills in the past, and how you've handled any credit that's been extended to you.