Is there such a thing as good debt?

[popup_menace]

The answer to your question is a very personalized one, in that there is no catch all scenario in which debt is good. There are, however, a lot of examples of bad debt

[jerp]

Correct me if I'm wrong but I could swear on multiple occasions he advised people against commercial debt.

You may be right - I have not read that much of his stuff but his emphasis seems to be on getting/staying out of debt by avoiding credit cards, car payments, etc.

[EatemUpCats]

I listen to Dave Ramsey daily. Yes, there is such a thing as good debt but I wouldn't consider a business loan good debt. There is nothing tangible backing the debt and if things went south with the business that "good" debt is going to turn bad real fast. Dave preaches real estate investing because you have a tangible asset that arguably will not depreciate and provides cash flow.

[buckmastertexas]

If it makes you more than it costs you...........

[M16]

I listen to Dave Ramsey daily. Yes, there is such a thing as good debt but I wouldn't consider a business loan good debt. There is nothing tangible backing the debt and if things went south with the business that "good" debt is going to turn bad real fast. Dave preaches real estate investing because you have a tangible asset that arguably will not depreciate and provides cash flow.

I would consider a business loan as good debt. If you can sell all the widgets you can make. But don't have the capitol to make them what's wrong with borrowing money? If things don't work out you can always file bankruptcy like Dave did.

I'm not anti Dave as he helps a lot of irresponsible people get out of debt. But business wise he gives some bad advise. He is one heck of a salesman. Whoever thought that you could sell common sense?

[robbyreneeward]

I listen to Dave Ramsey daily. Yes, there is such a thing as good debt but I wouldn't consider a business loan good debt. There is nothing tangible backing the debt and if things went south with the business that "good" debt is going to turn bad real fast. Dave preaches real estate investing because you have a tangible asset that arguably will not depreciate and provides cash flow.

Understood. He also says to buy it with cash. Dave preaches NO DEBT whatsoever. I would assume a restaurant franchise would be a good tangible asset since it provides cash flow and doesn't appreciate in value as long as it's managed properly. Hell the 2 stores my boss just bought will generate him 250-300k a year income, and he's a 50/50 partner in the new franchise group, and that's after the note payments are made by the stores.

[Hydestik]

I think what your saying is partially true but the consumer debt is what you need to get reduced . You would also need to have a sizeable amount of liquid assets to purchase most franchises .

[EatemUpCats]

I would consider a business loan as good debt. If you can sell all the widgets you can make. But don't have the capitol to make them what's wrong with borrowing money? If things don't work out you can always file bankruptcy like Dave did.

I'm not anti Dave as he helps a lot of irresponsible people get out of debt. But business wise he gives some bad advise. He is one heck of a salesman. Whoever thought that you could sell common sense?

A business loan is not good debt...it is bad debt. A business is just a piece of paper filed with the state, the only tangible assets are items you use on a daily basis that would be near worthless after purchasing (ie. restaurant supplies). I assume there is no real estate with the franchise and you would just be leasing a space (additional liability). Also, don't think of bankruptcy as just a stroll in the park. It's a life changing event that many people struggle to get out from.

[M16]

A business loan is not good debt...it is bad debt. A business is just a piece of paper filed with the state, the only tangible assets are items you use on a daily basis that would be near worthless after purchasing (ie. restaurant supplies). I assume there is no real estate with the franchise and you would just be leasing a space (additional liability). Also, don't think of bankruptcy as just a stroll in the park. It's a life changing event that many people struggle to get out from.

Alrighty. That has not been my experience. Had I not used borrowed money on some business deals I'd still be a working stiff.

[WItoTX]

Of course it's a good thing. Dave Ramsey talks a good game for fiscally irresponsible people. He says a lot of stupid things for people who are responsible.

This. That being said, I am responsible, but I am well on my way to no debt. Plan to buy my next F-250 with cash.

[robbyreneeward]

A business loan is not good debt...it is bad debt. A business is just a piece of paper filed with the state, the only tangible assets are items you use on a daily basis that would be near worthless after purchasing (ie. restaurant supplies). I assume there is no real estate with the franchise and you would just be leasing a space (additional liability). Also, don't think of bankruptcy as just a stroll in the park. It's a life changing event that many people struggle to get out from.

Yes the real estate was part of the purchase as well.

[Speedgoat]

Yes, borrowing money for a divorce, or a vasectomy. lol

[Sparkles]

Is there such a thing as good debt?

If you can make money on borrowed money and make money by investing your cash and putting it to work for you somewhere else, I would say that is good debt, but your talking about consumer debt it seems and likely you aren't going to make more than the apr of credit cards.
Countless financial advisors and wealth management guys disagree with Dave's investment strategies, so keep that in my mind as well.

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[texas shag]

A business loan is not good debt...it is bad debt. A business is just a piece of paper filed with the state, the only tangible assets are items you use on a daily basis that would be near worthless after purchasing (ie. restaurant supplies). I assume there is no real estate with the franchise and you would just be leasing a space (additional liability). Also, don't think of bankruptcy as just a stroll in the park. It's a life changing event that many people struggle to get out from.

There are plenty of people that have levered debt to success without it directly being tied to real estate. Sometimes success takes calculated, measured risks. If those risks include going into debt to execute a quality business plan, then it is not bad debt. If the business plan is not executed and the business fails, it is bad execution of the business. The debt tied to it is a byproduct of the failed business, which then becomes bad debt, but only at that point......

[TKK]

Good debt is when you can earn more than the interest cost on the debt - it is called arbitrage. Car loan rate is 1.5% and you can earn 4% on your investments then that is using someone else's money to make you money.

Bad debt is a credit card you pay 10% on each month but you are only earning 4% on your investments.

I can pay cash for anything I need to buy but I still finance some things. As others said before - depends on a number of factors but to say all debt is bad is not accurate.