Is It Better To Have Good Debt or No Debt At All?

Written by PayPlan on 2 August 2018

As well as having a negative impact on your finances, bad debt can leave you stressed and unhappy – that’s why most of us want to avoid at all costs. You may think it’s best to be completely debt-free, but is that always the case?

Debts are classed as ‘good’ when they help to improve your quality of life over the long-term. Most people couldn’t afford to buy a house or pay for their university education upfront, so take out a mortgage or loan. In some cases, not borrowing money might put you at a disadvantage, either because you end up spending more on renting, or are unable to get a higher-paid job.

If you’re a young person just starting out in life, it can be a good idea to use a credit card for everyday purchases, ensuring you are able to pay back the full amount every month. By showing credit providers that you are able to pay off your debts, you will start to build your credit score. As your score grows, gaining approval on tenancy agreements, mortgages, car finance and even a mobile phone contract gets easier.

Spending on a debit card often seems like a sensible option – and for those who struggle to manage their finances it is – but it won’t help you build a strong credit history. When you use a credit card, be aware that you can quickly get into bad debt if you fail to keep up with the repayments, so think carefully about what you can afford.

As people get older and reach retirement age, many dream of being completely debt and mortgage-free. After all, we all want to enjoy our later life without worrying about whether our pension and/or savings will cover our bills and mortgage repayments.

For pensioners, building a high credit score (if they haven’t got one already) might be less of a priority, since they tend to fund home improvements or household purchases with savings.  If someone dies with debt, whether good or bad, the remaining balance is paid off from the estate, so your loved ones may not benefit from an inheritance depending on the amount of debt and estate.

If you are struggling to pay down bad personal debts, and need free advice, contact PayPlan online or by calling 0808 278 9044.

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Filed under Debt Facts

This article was checked and deemed to be correct as at the above publication date, but please be aware that some things may have changed between then and now. So please don't rely on any of this information as a statement of fact, especially if the article was published some time ago.

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