All debt is not created equal. Good debt is referred to as debt that helps generate income and increases net worth such as education, business ownership, real estate, and investing. Even “good” debt is not guaranteed and can have a downside.

“Bad debt” refers to debts incurred to purchase depreciating assets such as vehicles, clothes, consumables, and other goods and services. Credit card debt is one of the worst due to high interest rates if not paid in full monthly.