Good Debt Vs. Bad Debt | Fidelity Investments

Not all debt is created equal. Watch this video to learn the difference between good and bad debt and how each can affect your financial future.

Questions? Drop them below 👇 and we’ll reply right in the comments.

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[joelcorley]

Debt is just a tool, same as a hammer, saw or a drill. There is no good or bad debt. There is just cheap debt and expensive debt and whether use of that debt helps you do more than the debt costs. The cost of debt is expressed in its interest rate. The value of what the purchase can do for you has to do with return of capital. If you are not getting back more from what you acquired with the debt than the debt is costing you, it's bad. Very bad.

You should only take on debt when it gives you some sort of advantage. The lower the rate, the more of an advantage the debt gives you. As you approach a 0% rate, the debt is arguably good. 0% is very good.

So it just boils down to the interest rate of the debt.