Good debt vs bad debt

Not all debt is the enemy

Most advice treats all debt like poison. That's lazy. A 3% mortgage is nothing like a 26% credit card.

Learn the difference and your decisions get sharper. Which debts to kill first, which to leave alone, which ones actually build wealth.

Simple test. Does this debt make you money or cost you money?

Key points

• Good debt builds or earns. Mortgages, business loans, education that lifts your income. The asset produces more value than the interest costs.
• Bad debt consumes. Credit cards for lifestyle, payday loans, financed vacations, luxury car loans. You pay interest on things that lose value the second you use them.
• The 10% test. Anything above 10% goes first. Below 6% can wait.
• Business debt sits in the middle. A credit line for payroll during slow months is smart. For gear you don't need, it isn't. Ask what the debt actually funded.

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