When is there such a thing as good debt?

by. Sophia Bera

Most of the time, the word “debt” has negative connotations. Debt costs you money — thanks to interest rates — and therefore takes money away from financial goals like saving and investing. And the stress of carrying and repaying debt can take a serious toll on your health and relationships.

So could there ever be good debt? There’s no hard-and-fast answer. That’s because how you use debt has a big impact on whether or not you can consider it “good.” And you can have too much of a “good” thing — and that’s when it can turn into bad debt.

Yes, you can use debt as a tool. Debt can provide leverage and create opportunities for you to improve your financial situation if you use it wisely. However, it’s important to do a cost benefit analysis. Let’s consider three types of debt: investing in a college education, buying a home or starting a business.

1. Are Student Loans Always Good Debt?

After working with tons of millennials across the country, I don’t think that student loans are always good debt. I’ve seen quite a few people with high interest rates on private student loans, and I caution you against taking out private student loans for any reason.

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