Debt has a reputation problem. And honestly? It’s not completely undeserved. Credit card interest, payday loans, overextended car payments—there’s no shortage of debt traps out there. But not all debt is created equal.
There’s a kind of debt that—when used intentionally and strategically—can build your future instead of drain it. The kind that doesn’t just solve a short-term problem but helps you create long-term value. This is what we call good debt.
Now, let’s be clear: even “good” debt is still debt. It still comes with responsibility. But in the right situations, it can be a smart, calculated tool that moves you forward financially, professionally, or personally.
The key is knowing when it makes sense—and when it’s just dressed-up overspending.
What Actually Counts as Good Debt?
Good debt is any debt that gives you long-term value that outweighs the cost. This could mean:
- Building equity
- Increasing your earning potential
- Protecting your cash flow during a growth period
- Strengthening your credit
- Creating leverage (with a plan)
It’s not about borrowing for the sake of borrowing—it’s about borrowing with a clear return in mind. It’s the difference between financing your future vs. financing your lifestyle.
Household debt in the U.S. has hit a new record, reaching $18.59 trillion between July and September, according to the Federal Reserve Bank of New York. That’s an increase of $197 billion from the previous quarter—and $4.4 trillion more than at the end of 2019, before the pandemic began.
1. When You Need to Buy Time to Pivot Careers or Reskill
If you’re shifting industries, going back to school, or taking a career sabbatical to reskill—taking on a low-interest loan or using a line of credit could buy you the space to make that transition thoughtfully instead of out of panic.
For example, someone leaving a burnout-heavy job to transition into UX design, digital marketing, or a trade apprenticeship might need a 6–12 month runway. A small personal loan or 0% interest credit card (used with a plan) could support essentials while you build momentum in a new direction.
Why it’s good debt: You’re investing in higher earning potential and personal alignment. As long as there’s a timeline and payoff plan, this could be a strategic step, not a setback.
2. To Cover Startup Costs for a Business—But Only Under One Key Condition
Not all businesses require huge upfront investments, but some do. Equipment, software, legal services, web development, inventory—these costs add up.
Using debt here can make sense, if you already have a clear revenue plan in place.
In other words: don’t go into debt to start brainstorming. Go into debt to execute a validated idea. Maybe you’ve been freelancing on the side and need to legitimize your business with better tools. Or you’ve tested a product, and now it’s time to scale inventory.
Options could include:
- Business credit cards with 0% introductory APRs
- SBA microloans
- Personal loans with low fixed rates
Why it’s good debt: You’re exchanging capital now for income later, based on a plan—not hope. The risk is calculated, not emotional.
3. To Finance a Certification With Proven ROI
There’s a lot of talk about traditional education being “good debt,” but these days, more people are getting value from non-degree programs—think Google Certificates, coding bootcamps, project management training, or specialized courses in growing fields.
If you’ve vetted a program, read alumni stories, confirmed hiring trends, and know it leads to real opportunities, using a low-interest payment plan or personal loan may be smarter than waiting months (or years) to save up cash.
The key is knowing the return—will this certification significantly boost your income or job prospects? If so, financing it over 6–12 months may be worth it.
According to the U.S. Bureau of Labor Statistics, jobs requiring certifications or non-degree credentials are growing faster in many sectors than traditional degree-requiring roles, especially in tech and healthcare.
4. To Spread Out an Annual Expense You’d Otherwise Skip
This one may sound counterintuitive, but hear me out.
Sometimes, you face a big annual opportunity or need that costs more upfront than you can cover—but skipping it means losing out long-term. Maybe it’s professional liability insurance, a prepaid retreat, or a lump-sum business conference that connects you to real clients.
Instead of saying “no” or putting it on a high-interest card, using planned debt (like a short-term installment loan or a 0% financing offer) may let you say yes strategically.
Caution: Only do this when the payoff is clear, and when spreading the cost means better outcomes—not just easier spending.
Why it’s good debt: You’re using time and flexibility to say yes to value—not just convenience.
5. To Consolidate High-Interest Debt Into Something Actually Manageable
This is one of the most traditional “good debt” moves—but here’s a smarter, often-overlooked twist:
Don’t wait until you’re drowning.
If you have multiple balances at different interest rates and you're managing okay—but not well—consider consolidating into a single personal loan with fixed monthly payments before things get messy.
It gives you clarity, protects your credit score, and may save you thousands in interest—without needing a full-blown debt crisis.
Alternatively, if your credit score is strong, a 0% APR balance transfer card (with a realistic payoff plan) could also work.
Why it’s good debt: You’re swapping chaos for structure, high rates for low ones, and emotional debt for a calm, plan-based approach.
6. To Unlock Access to Better Housing Options During a Relocation
Relocating for work or family can get expensive—and sometimes, the best option requires up-front money you don’t quite have in cash.
Think:
- First and last month’s rent
- Moving costs
- Short-term storage
- Lease deposits
Using a short-term, low-cost loan to access a safer, more stable, or more convenient housing option could be worth it—especially if it supports your income (e.g., shorter commute), safety, or work-life balance.
It’s not just about getting a nicer place—it’s about reducing burnout, improving access, and setting yourself up in a home environment that lets you succeed.
Why it’s good debt: You’re investing in stability and productivity, not luxury for the sake of it.
7. To “Buy Time” During a Cash Flow Gap—But Only With a Written Exit Plan
Let’s say you’re between gigs, waiting on client payments, or navigating an unpredictable income season (hello, freelancers). In moments like these, taking on short-term debt may help you stay afloat without derailing everything else.
The trick is to treat it like a temporary bridge, not a new habit.
Before you borrow, write down:
- Your current cash flow reality
- How much you need to borrow to maintain essential expenses
- Your realistic plan to pay it back (specific dates, income sources, etc.)
Also? Be honest about what’s essential. This is short-term support, not an excuse for lifestyle upgrades.
Why it’s good debt: You’re preventing damage (like missed rent or credit hits) while protecting your long-term trajectory. But the plan is what separates this from financial avoidance.
The Money Notes
- Use debt when it unlocks future income or opportunity—not just comfort.
- Don’t wait for a financial emergency to consolidate high-interest debt—you’ll save more if you act early.
- Plan your exit before you borrow—every good debt move needs a repayment roadmap.
- Investing in a certification or training can be smart debt, but only if it leads to measurable ROI.
- Not all housing upgrades are lifestyle creep—some are investments in your daily peace, safety, or productivity.
Good Debt Is Still Debt—But It Can Also Be a Door**
Debt isn’t always a mistake. Sometimes, it’s a move—a calculated, strategic, carefully considered decision that buys you time, flexibility, education, or opportunity. The difference between good and bad debt isn’t the product—it’s the plan.
So if you’re navigating a moment where borrowing feels necessary, don’t just ask, “Can I afford the payments?”
Ask:
- What is this debt doing for me in the long run?
- Do I have a realistic way to pay this off—on time, without disruption?
- Am I building something—or avoiding something?
Use good debt with clarity, purpose, and boundaries. Because the goal isn’t just to avoid debt. It’s to use every financial tool available—wisely, intentionally, and on your terms.
