Is there a good use for debt?

I asked the question last time, “Is there ever a good reason to go into debt?”  This is a hard one to answer.  It’s hard to say “yes” to this question knowing that debt represents losing a bit of our freedom.  But permit me to play devils advocate for a moment.  Sometimes debt might be a necessary means to a greater end.  Let me give you 2 reasons most consider acceptable reasons for debt.

Debt for educational purposes –  What if you have a dream to be a doctor?  You have a deep desire to help people with medical problems.  But in order for you to become a doctor it will require 8 years of training to the tune of over $150,000.  Is it worth it?  Many doctors would say yes.  In a way, borrowing for educational reasons is investing for your future.  What are you investing in?  Your dream…and the ability to earn a great living.  I personally don’t know of any doctors who began their careers debt free.  If you can follow your dream without taking on school loans, that is the ideal situation, but not easy for some careers and most people.

Debt out of necessity – If you’ve ever bought a house without paying cash, then you have taken on debt to meet a need. We all need a place to live.  Most people fall into two categories, renters and owners.  Either way you have to pay money for a place to live.  Some argue that renting is throwing away money.  You pay nothing toward owning the house when you rent.  But when you purchase a home, at least part of your payment usually goes toward owning it…someday.  This kind of debt is usually considered “acceptable” in most people’s eyes..  In a way you could say it is the lesser of two evils.  The only situation I don’t believe in is taking an “interest only” loan.  In this case you can say you bought a house, but truthfully you are renting.  The same argument could be made for buying a car.  Only in this case understand that you are taking on debt for a depreciating asset.  Not usually the best idea, but sometimes it is a necessity.

These two reasons are commonly considered acceptable reasons for going into debt.  I personally carry a mortgage and have at times had a car loan.  But in both of these cases, I have never been upside down in the loans (owing less than something is worth).  Sometimes debt can be a necessary means to an end.

What do you think?

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