Reasons for and Against Going Into Debt

Struggling to manage debt can represent a game of strategy.
Photo: Gary Waters / Getty Images

Debt is a four-letter word that many people want to banish from their vocabularies and their lives. Debt can continue to grow and cause you to lose everything you own—how could there be good reasons to go into debt?

Not all debt is bad debt. In fact, even “bad” debt isn’t so bad when it’s kept at a level reasonable for your income. Still, beware of too much debt. Here are some good reasons to go into debt.

Reasons to Go Into Debt

There are reasons you may want to assume some debt. You should consider each type of debt carefully and think about how that will impact your life and your ability to live the lifestyle you want to live.

Get a college degree. Statistics show that college graduates earn more than workers who only have a high school diploma. According to the U.S. Bureau of Labor Statistics, college graduates earn nearly double that of high school graduates. Applying for financial aid and taking out a student loan to pay for your college education might be a good idea if you get a degree in a field that has a good income.

Buy a home. Generally, houses are considered an investment because they increase in value. Taking out a mortgage with the right terms will leave you with a valuable asset once the loan is repaid. Shop around for your home and your mortgage to make sure you’re making a sound investment.

Start a business. If you have a profitable business idea, taking out a loan to get you started is just a mere cost of starting up. Using a loan to jumpstart a viable business is a wise thing to do. As you begin making money, pay back the loan. Soon, you’ll be debt-free and the profit you make will be yours to keep (or to reinvest in your business).

Reasons Not to Go Into Debt

  1. Go on vacation.
  2. Buy a designer purse/shades/shoes/you-name-it.
  3. Pay off other debt—unless you’re doing a balance transfer or debt consolidation loan with better terms.
  4. Buy gifts for others.
  5. Get furniture for the new house.

None of these are things that appreciate in value. In fact, all of these depreciate soon after you use them. You’re often left with debt and nothing to show for it. Instead of using credit or loans to pay for consumable goods, save up and use cash. That way you enjoy your purchase without worrying about paying for it later.

Good Debt Can Go Bad

If you're not careful, that good debt you took out can turn bad.

Don't take out more debt than you need to. Take out just enough student loans to cover your education expenses, just enough mortgage to purchase your home, and just enough business loan to cover your startup costs.

Make your payments on time or contact your lender asap. Making timely loan payments is key to keeping your credit score intact. All it takes is a couple of months of late payments to wreck your credit score.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. U.S. Bureau of Labor Statistics. "Learn More, Earn More: Education Leads to Higher Wages, Lower Unemployment." Accessed May 27, 2021.

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