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When is it okay to go into debt?

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Carl Book
Carl Book
4 months ago

Avoid auto loans, if possible. If you need to borrow to buy a new car, you may not need to buy a new car. It is a rapidly depreciating asset.

Mike Zaccardi
Mike Zaccardi
6 months ago

Certainly. Debt is not the root of all evil (neither is money, for that matter). Taking on debt for education and when buying a house is absolutely fine. For the riskier folks out there, taking out loans to fund your business is great too. It’s debt that has no plan to be repaid that is the problem. Everyone borrowing money must be intentional about using the money to better one’s life or for responsible enjoyment, but also have a path to pay it down.

Carl Book
Carl Book
4 months ago
Reply to  Mike Zaccardi

I think you need to qualify the advice about student debt. We have too many students borrowing too much money with poor prospects of being able to repay the debt.

johntlim
johntlim
7 months ago

It is okay to go into debt in order to invest in something with a greater return than the cost of the debt. The quintessential example is taking on student loans to invest in your education. The lifetime income for college graduates is far higher than noncollege graduates. It’s also okay to take on mortgage debt.

booch221
booch221
7 months ago
Reply to  johntlim

I agree to a certain extent. Keep your student loans to the bare minimum. Go to an in-state public university instead of a private one, unless you get a scholarship. Seek out financial aid and work part time if necessary. Pick a major that will lead to a good paying job.

Last edited 7 months ago by booch221
Sanjib Saha
Sanjib Saha
7 months ago

In spite of being allergic to debt, I’m open to it when there’s a high probability of achieving something which would otherwise be very hard to accomplish without debt, AND the “worst-case” outcome is acceptable. I borrowed twice for house purchase. The first one was a small townhome that I paid off in 3 years. The second one was a small single-family house that took me almost 10 years to pay off. In both cases, I kept my cost low and avoided buying something that I didn’t need. I also made enough down-payments so that in the worst-case, I could sell the property and pay off the debt.

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