The good debt myth: Can we still call debt good?

From an early age most of us learn that money is transient. Once it’s spent we need to first make more in order to spend again. It’s only when we get a bit older and borrowing money becomes an option that we start to explore the possibility of spending without first earning. Many people believe in good debt when it relates to bettering yourself, but perhaps since the recession hit, ‘good debt’ has gone back to being a myth.
The education debate
Unless you’re in the minority of people who can afford to fork out the rising annual fees for further education then it’s likely the decision to go to university will go hand in hand with taking out a loan. Most banks are willing to loan students enough for their fees and living allowances as well as a decent overdraft with very reasonable interest rates once you complete your study. Postgraduates who started University in 2008 will have avoided the recent fees hike and as a result will have left university with an average of £22,000 worth of debt and likely found jobs to repay this fairly painlessly. Those starting University in 2012 are predicted to have an average of £53,400 as well as less career prospects due to the recession. So can we really still consider this debt, which may now take much longer to pay back, good?
Getting on the property ladder
When it comes to mortgages, most people would argue that debt of this kind is good simply because you’ve secured a long term investment; you’re not throwing money down the drain renting. However, you won’t actually see a profit from that debt, unless upon selling you make one, but does that really matter, you’ve got that investment after all. It seems so long as you are able to keep up with your repayments, mortgage debt could be considered ‘good debt’. Of course many people who took out mortgages in the last few years, the prospect of making a profit through equity will be slim, with house prices dropping dramatically.
Car Loans
Is it ever really justifiable to take out a large loan on a car? As soon as you turn the ignition the vehicle has already decreased in value and if you need a car for work you should buy what you can afford, or take out the least loan possible and ensure you can repay it.
Payday loans
There’s recently been an explosion of advertisement for this kind of loan, getting an advance on your pay may seem like a good quick fix, but wouldn’t a credit card with a fixed monthly repayment plan be a better option? Companies willing to divvy out payday advance loans often claim back extortionate amounts of interest, and even with a credit card you’re building a good rating which could help with more important purchases later in life.
It seems then that ‘good debt’ does exist in some cases, namely those where you can afford to make the repayments and those where the debt has lead to something better for yourself, i.e. a better job after going to University or the investment in property, but it’s still all relative to your income, and if you can’t afford the repayments, don’t take out the loan.

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