Debt — What to Avoid and What's Acceptable

Not all debt is equal. Debt that builds assets or increases earning power can be worthwhile. Debt that funds consumption is dangerous.

"Good" debt (use cautiously):

Mortgage — builds equity, often tax-deductible, appreciating asset

Student loans — invests in earning potential (if degree pays off)

Business loan — builds an asset

"Bad" debt (avoid):

Credit card balances — 20–29% interest; wealth destruction

Payday loans — 400%+ APR; predatory

Car loans for depreciating luxury cars

Buy Now Pay Later misuse

Debt payoff strategies:

Avalanche method — pay highest interest rate first; saves the most money mathematically

Snowball method (Dave Ramsey) — pay smallest balance first; builds psychological momentum

Credit card strategy for those who can:

Pay full balance every month = 0% cost + rewards + credit score building

Carry a balance = 20%+ interest = financial damage

The debt trap: Minimum payments on credit cards can take 20+ years to pay off and cost 2–3x the original amount.

Reference:

Wikipedia: Debt

https://en.wikipedia.org/wiki/Debt