Good debt vs bad debt

Not all debt is the same. Some debt makes you rich, some ruins you.

You can borrow 10,000 euros. Where you spend it determines if you get rich or poor.

Good debt: the mortgage

You borrow to buy a house. The house goes up in value. After 30 years, you have an asset worth more. That's good debt.

Good debt: education loan

You borrow to learn a skill. Your salary increases. You pay back the loan easily. That's good debt.

Bad debt: credit card

You use the card for things you don't need. You pay 20% interest. The money disappears, you just have more debt.

Bad debt: quick credit

"3000 euros in 10 minutes". These are crazy expensive loans. The interest is so brutal it's almost illegal (but legal).

The key difference

Good debt: you borrow for something that generates value or goes up in price.

Bad debt: you borrow for consumption (things that go down in price).

How to know which is which

Ask yourself: will this make me money in the future? If yes, it's good debt.

Will this disappear and leave me poorer? If yes, it's bad debt.

The golden rule

Use good debt to build assets. Avoid bad debt like the plague.

Real numbers

Mortgage at 3% to buy a house = good.

Credit card at 20% to buy clothes = bad.

Loan at 5% to buy a business machine = good.