Good debt vs bad debt: Is borrowing always a bad idea?
Any debt one cannot afford to repay becomes a serious financial burden.
SHAH ALAM - Debt often gets a bad reputation, but not all borrowing spells financial doom. While credit card balances and personal loans can weigh you down, strategic borrowing—like investing in property—can pave the way to financial growth.
So, does good debt really exist or is it just a clever spin on borrowing?
Financial expert Suraya Zainudin and the creator of Ringgit Oh Ringgit, explained that bad debt includes credit card balances and personal loans, but ultimately, any debt one cannot afford to repay becomes a serious financial burden.
“Even mortgages and car loans, often labeled as ‘good debt’ because they provide essential benefits like housing and transportation, can turn into bad debt if the monthly payments exceed what you can comfortably afford.
“Some believe that having no debt at all is ideal, but strategic borrowing can be beneficial when it enhances financial stability. For instance, property ownership is generally considered a good investment, as it serves both as an appreciating asset and a necessity for daily life.
“This is an example of a good debt,” Suraya said at Sinar Daily’s She Leads 6 programme.
She highlighted the importance of aligning debt with financial goals rather than letting it become an obstacle. If a mortgage takes up half of your salary, leaving little room for other expenses or opportunities, it can lead to financial strain and restrict career growth.
Suraya added that the key is to ensure that debt serves as a stepping stone toward progress rather than a weight that holds you back.
“When people talk about financial freedom, I take a direct approach because I am a realist.
“The truth is, due to the way our system, environment and capitalism function, not everyone can achieve financial freedom—it is statistically impossible,” she said.
Suraya stressed that financial stability is an achievable goal for anyone.
She explained that wealth operates on multiple levels, with most people beginning at the lowest tier—financial scarcity—where money is just enough to cover basic needs.
“The next step up is financial stability, which comes with key characteristics: earning more than you spend, avoiding bad debt and staying free from credit card debt, bank loans or personal loans.
“Many aspiring entrepreneurs believe they need a large amount of capital to start a business, but that is often a misconception.
“Success is not solely dependent on having a big financial cushion from the start,” she said.
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