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Good Debt Vs. Bad Debt

Tuesday, July 13, 2010 - 3:58 PM


These general rules of thumb set some clear delineations -- buying a home or refinancing to get rid of excessively high rates is usually good debt, as is generating debt to buy high-return stocks, bonds and other investments.

The best type of debt is debt that builds wealth over the long run, and the No. 1 example of that is mortgage debt.

Bach cites some shocking numbers to back this up. "The average renter has a median net worth of $4,000, and the average homeowner has a median net worth of about $150,000."

Manning also emphasizes what a good time this is to build wealth through debt. "This is the most advantageous time ever to be in debt," says Manning, "in terms of opportunities to get low-interest loans or to renegotiate or refinance."


MikeMike327 posts since
Feb 22, 2010
Rep Points: 875
1. Tuesday, July 13, 2010 - 6:27 PM
I don't know if I would consider "generating debt to buy high-return stocks" as an example of "good debt" since high-return stocks have significant risk.
Ken TuminKen Tumin5,442 posts since
Nov 29, 2009
Rep Points: 123,699
2. Tuesday, July 13, 2010 - 6:45 PM
I agree...  I suppose, for some, if they aren't risking their necessities and family, buying on margin and using leverage can be a useful tool. 
MikeMike327 posts since
Feb 22, 2010
Rep Points: 875