Debt is an accepted part of modern life, with many people carrying financial obligations through loans, credit cards, and mortgages. However, not all debt is made equal, and it is critical to understand the distinction between secured debt and bad debt.

PHOTO | COURTESY debt vs income

good debt

Good debt is debt obtained to purchase real estate, the value of that which increases or generates income for the investment. Here are some good loan examples:

1 Home mortgages

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A home loan is a financial instrument used to purchase a home. Despite what appears to be a large amount of financial obligation, owning a home is an asset that typically appreciates in worth over time. Furthermore, property ownership can provide assurance and safety.

2 Student Loans

Student loan debt is used to study to obtain a high-paying job and advance one's career. Student loans, in other words, are a way to secure your potential future earnings.

3 Business Loans

If you are a businessman or small business owner, borrowing money to start or expand your company can be a wise decision. A well-run business can generate income and earn an investment return which can be utilized to pay off debt.

PHOTO | COURTESY bills

bad debts

1 Credit failures
Credit failures are liabilities incurred when purchasing assets that depreciate or fail to give a return on investment. Here are a few examples of poor credit:

2 Debt on credit cards

The most common type of bad debt is credit card debt. This type of debt is frequently used to purchase items that will wear out rapidly or have no long-term value. Furthermore, the interest rates on credit cards are typically high, making it hard to repay debt quickly.

3 Car Loans

While many people require a car, a large car loan can be a bad debt. Cars depreciate rapidly and frequently necessitate ongoing repairs and upkeep, which makes it hard to recoup the initial investment.

4 Personal loans


Personal loans are frequently used to cover unexpected costs or to finance lifestyle purchases. On the other hand, personal loans typically have high-interest rates, making it difficult to make payments quickly.