Far better it is to dare mighty things, to win glorious triumphs, even though checkered by failure, than to take rank with those poor spirits who neither enjoy much nor suffer much, because they live in the gray twilight that knows neither victory nor defeat.

Theodore Roosevelt, The Strenuous Life

By , on April 20, 2010

Managing Debt, Money and Finance

I’ve had enough financial advisers and journalists make the conclusory statement that credit card debt is bad to reach a generalization. Financial advisers and lawyers view debt somewhat differently. The financial adviser feels credit card debt does not represent money well spent but does represent a high interest loan. I have even had one advise me to pay a credit card debt with a lower interest rate than my mortgage! That is absurd.

Let me give you one lawyer’s view. Bad debt is secured or has a high interest rate or a variable interest rate. Bad debt requires fixed payments irrespective of extra payments or any other action by the debtor. Many of us have these debts in the form of mortgages and car loans. As with any debt or good liquor, neither should cause difficulty when used in moderation.  Secured loans for houses and cars can create a win/win situation for the creditor and the debtor.

The opposite characteristics are features of good debt, especially being unsecured and low interest. We bought a truck using a loan secured by an investment property. Why? We could pay as little as interest only, the interest rate is low right now, and we have the cash to pay it off. The joke is that a default costs our tenants their home but we can keep our truck. That is thinking like a red neck, I guess.

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