We treat 'debt' as one scary word, but there's a world of difference between a home loan and a credit-card balance. Telling them apart is one of the highest-leverage money skills you can build.
Good debt buys assets
Good debt funds something that grows in value or earns income — a home, an education, a business. The asset, or the higher income it brings, can outpace the interest you pay. It's borrowing that builds.
Bad debt buys depreciating stuff
Bad debt funds things that lose value the moment you own them — the latest phone on EMI, a car beyond your means, a holiday on a credit card. You end up paying interest on something already worth less than you paid.
The 42% credit-card trap
Indian credit cards often charge around 36-42% a year on unpaid balances. By the Rule of 72, a 42% rate doubles what you owe in under two years. Paying only the 'minimum due' can keep you in debt for a decade — it's the most dangerous number most people quietly carry.
The one question before you borrow
Will this debt leave me richer or poorer in five years? A home loan or a skill often makes you richer; a gadget or a lifestyle spend on EMI almost always makes you poorer. That single question sorts most borrowing decisions.
EMI Calculator — see any loan's true costBorrow to build, not to consume. And if you carry a credit-card balance, clearing it is the highest guaranteed return you will ever earn.
Frequently asked questions
- What is good debt vs bad debt?
- Good debt funds an appreciating asset or higher income — a home, education or business — where the gain can beat the interest. Bad debt funds depreciating consumption — gadgets, cars beyond your means, or card spends — where you pay interest on something losing value.
- How fast does credit-card debt grow?
- Indian cards often charge about 36-42% a year on unpaid balances. By the Rule of 72, a 42% rate doubles what you owe in under two years, which is why paying only the minimum due can trap you for years.