Not all debt is bad. Here’s how to use it to your advantage.
Debt often gets a bad rap, but not all debt is created equal. In fact, certain types of debt—when used wisely—can help you build wealth, launch a career, or own your home. The real challenge is knowing the difference between good debt and bad debt, and using credit as a tool, not a trap.
Let’s explore which types of debt can help you move forward—and which might pull you back.
Understanding Our Debt-Driven Society
A recent TransUnion Canada survey revealed a startling truth: 43% of Canadians plan to open a new credit card in 2025. One in five expects to take on new debt.
Why? Even as inflation cools, everyday essentials remain expensive. With wages struggling to keep pace, debt can feel like the only option.
And debt is everywhere now. Compared to 20 years ago, today’s consumers juggle not just car or home loans, but student loans, buy-now-pay-later bills, credit card balances, and even rent-to-own payments.
These commitments can quickly add up—leaving little room to save, invest, or plan for the future.
What Is Good Debt?
Good debt helps you grow—financially, professionally, or personally. It’s an investment that pays off over time.
1. Student Loans
Higher education is expensive, but the return on investment can be worth it. A degree or certification can unlock better job opportunities and higher income potential.
Just make sure you choose your program and school wisely to avoid excessive borrowing.
2. Home Loans
Buying a home with a mortgage is one of the most common examples of good debt. With regular payments, you build equity, which adds to your net worth.
Your home can later serve as collateral to support future loans for renovations or investments.
3. Small Business Loans
Launching a business often needs upfront capital—for inventory, marketing, or payroll. With a solid business plan and responsible use of credit, entrepreneurship debt can lead to long-term profits and independence.
What Is Bad Debt?
Bad debt usually comes with high interest and low value. It doesn’t build wealth—it drains it.
1. Credit Card Debt
Credit cards can be helpful tools, but high-interest rates make it easy to fall into a cycle of minimum payments and mounting balances.
2. High-Interest Auto Loans
If your credit score is low, you may only qualify for expensive car loans. These can leave you paying far more than the car is worth.
3. Payday or Personal Loans
Desperation often drives people to payday lenders. These loans have sky-high interest rates and short terms, trapping borrowers in expensive cycles of repayment.
Avoiding Bad Debt: Simple Habits, Big Wins
Managing debt responsibly begins with living below your means. That doesn’t mean cutting all joy out of life—it just means spending thoughtfully.
Create a budget that allows room for savings and unexpected costs. That emergency buffer helps you avoid borrowing during hard times.
Here’s how to stay smart with credit:
Use credit cards wisely—pay off the full balance monthly
Keep your debt-to-income ratio low
Save for large purchases instead of financing them at high rates
Build your credit score over time for better loan options
Bottom Line: Use Debt to Move Forward, Not Backward
Good debt helps you grow. Bad debt holds you back. The goal is to use credit to support your long-term goals, not sabotage them.
Whether you’re financing your education, buying your first home, or building a business, the key is to understand your obligations and use debt with intention.
Stay tuned to Maple News Wire for more financial insights that help you take control of your money and your future.
