There are essentially 3 types of Debt:

1.Good Debt

2.Bad Debt

3.Necessary Debt

Good Debt is when you buy income appreciating assets (Business loans are also considered good debt as long as your business is making a profit).

Necessary Debt Could be a loan against your home or a Student Loan.

Bad Debts are Credit Cards, Car and Consumer Loans.

Good and Necessary Debt are an investment in yourself because you are borrowing money to create an income producing property or to pay for an education that will increase your capacity to earn.

Bad Debt is the kind of Debt that you want to minimize and eradicate as quickly as you can while you maximize your Good Debt, which is usually Tax Deductible.

If you’re still at the asset growth stage of your investment journey, you’ll need to minimise bad debt and pay it off as quickly as you can while you maximise your good (usually tax deductible) debt and buy appreciating assets.

By the way

Good debt tends to have lower interest rates while the interest rates of bad debt tends to be higher.


RealRenta can help you reduce your bad debt by reducing the cost of your property management fees, thus saving you money which you can put off your bad debts.

RealRenta, Just a better way to manage your rental property

Jason Gwerder
Friday, 29 April 2016

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