Why Knowing Debt Types Matters
Understanding good debt and bad debt is key to financial health. While some borrowing builds assets, other types can quickly drag you down. Insolvency expert Marc Rouleau of Doyle Salewski explains how to tell the difference, and why it matters for your future.
What Makes Debt “Good”?
Rouleau stresses that good debt must fit your budget. If monthly payments strain your finances, rethink the plan before signing. He advises borrowers to double-check affordability instead of relying on what lenders say.
Interest rates also matter. The stronger your credit rating, the lower your borrowing costs should be. Paying 15% interest on a mortgage, for example, is far too high. Borrowing for major needs—like a house, car, or education—can qualify as good debt if it aligns with your budget and builds value.
The Risks of Bad Debt
Not all loans benefit you. Payday loans, for instance, often look small at first but carry massive costs. A $50 charge on a $300 loan translates into shockingly high annual interest—sometimes up to 300%.
Rouleau warns against owing money to the Canada Revenue Agency as well. Unlike other creditors, CRA can freeze accounts, garnish wages, or even lien property. Utilities also hold unique leverage since they can cut services if payments fall behind.
Credit card debt remains the most common—and most damaging—form of bad debt. With interest rates above 20%, balances can spiral quickly. Some people try to juggle multiple cards, but that only deepens the problem.
Building a Smarter Debt Plan
Rouleau recommends attaching every loan to a clear purpose or asset. That way, borrowing works for you rather than against you. He also advises avoiding debt that erodes financial stability or piles on unnecessary stress.
If debt keeps you awake at night, he urges seeking professional advice. Experts can walk you through budgets, repayment plans, and strategies to regain control. The peace of mind alone can make a huge difference.
The Bottom Line
Good debt can help you grow, but bad debt can sink you fast. By focusing on smart borrowing, fair rates, and clear plans, you can protect both your wallet and your well-being.
Stay tuned to Maple Wire for the next news update.
