Quiz: Good debt or bad debt

Here is a quiz.  Identify the following as good or bad debt:

Student loans

Government debt

US dollar carry trade

mortgage

car loan

credit card debt

margin debt

I.O.U.

Gambling debts

Home equity line of credit

business line of credit

for my answers click here

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3 thoughts on “Quiz: Good debt or bad debt

  1. According to the dominant historical Christian tradition, all of the above (with the possible exception of I.O.U.s) are bad forms of debt.

    xoxo

  2. My answers (short form):

    student loans: good if you get a job that helps you to pay off the loan in a timely manner and the education was necessary to get the job; bad if you can’t find a job and have to live with mom and dad after graduation (as we did).

    government debt: almost always bad

    US dollar carry trade: good in the current climate if adequate investments (which cover all interest payments) can be found

    mortgage: usually good

    car loan: Usually bad, because it is better to buy a car that one can afford without debt–unless the reliability of the car is necessary.

    credit card debt: always bad

    margin debt: Can be good, but a one must leave sufficient margin or have cash or credit from another source to back it up.

    I.O.U.: depends. Probably usually bad and something to avoid if possible. But sometimes it is impossible to avoid it.

    gambling debts: This is probably worse than credit card debt and can get your legs broken.

    Home equity line of credit: Good if used for wise investments; bad if used to pay off consumer debt.

    business line of credit: Good if used as a bridge loan to cover costs in filling orders; it can be a trap for businesses with inadequate cash flow.

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