“Never a borrower or a lender be” quipped Shakespeare in his play, Merchant of Venice. But actually, some loans are good.
For example, secured loans taken to buy a house work to your advantage. Instead of paying rent, which doesn’t earn you anything, your mortgage eventually adds to your assets, or the property that you can now call your own. Investing in college or your MBA can increase your income, while entrepreneurs like Bill Gates are proof of how taking a risk on a good business idea can pay up in the millions.
Bad debt is when you borrow money for things that automatically deteriorate in value, such as expensive dinners (which are over by the end of the night), vacations, or those designer shoes. With these kinds of personal loans, you get only immediate satisfaction but end up paying for it over several months, plus interest.
