{"id":18310,"date":"2021-04-27T20:00:00","date_gmt":"2021-04-27T12:00:00","guid":{"rendered":"https:\/\/www.comparehero.my\/blog\/uncategorized\/good-debt-vs-bad-debt.html"},"modified":"2026-03-26T16:01:52","modified_gmt":"2026-03-26T08:01:52","slug":"good-debt-vs-bad-debt","status":"publish","type":"post","link":"https:\/\/www.comparehero.my\/blog\/finance-explained\/good-debt-vs-bad-debt.html","title":{"rendered":"Know The Difference Between Good Debt and Bad Debt"},"content":{"rendered":"\n

The term \u2018debt\u2019 is mostly associated with negativity. However, like many things in life, there\u2019s always a good side.<\/p> \n

While some loans are usually detrimental to your financial standing from the get go (such as overspending on shopping and travelling expenses, etc.) there is another end of the spectrum with \u2018good\u2019 loans that actually add value, likened to the old adage “it takes money to make money.”<\/p> \n

However, even the best of debts with the initial intention of growing wealth might quickly turn into bad debts – it all really depends on where you draw the line. Read on to learn more about good debts, and how they can turn into nasty ones if you\u2019re not careful.<\/p> \n

What is a good debt?<\/h2> \n

Good debts: Making sure it\u2019s really \u2018good\u2019<\/p> \n

So here\u2019s the concept of good debts: If the loan will help increase your net worth or generate more income, it\u2019s GOOD. However, things will never be as simple as it seems, so let\u2019s dive in deeper with a list of debts identified as \u2018good\u2019 – as well as the slippery slopes you should take note of:<\/p> \n

Higher education<\/h3> \n

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It is no secret that with more education, a person\u2019s future income will be more likely improved and secured. To maximize the \u2018good\u2019 value of this particular debt, one should weigh the pros and cons in degrees of interest. If there’s a lack of demand for your degree of choice, this good debt can quickly turn into a BAD one.<\/p> \n

For example, it was found that Actuarial Science students are highly sought after, with an average starting pay of $60,000. On the flip side, Fine Arts degree students face an unemployment rate of 12% and earns an average starting pay of $30,000.<\/p> \n

Unsure which degree to go for? You can always start by picking the right pre-university programme<\/a> to explore the options.<\/p> \n

SME ownership<\/h3> \n

\"\"<\/p> \n

This is literally making money with money. As compared to education loans, this is riskier and might turn bad as well. Therefore it is important to start with a business that is an area of your expertise, driven by passion.<\/p> \n

It\u2019s also important to do thorough research about funding that business idea of yours.<\/p> \n

Related: <\/strong>Starting A Business In Today\u2019s COVID-19 World \u2013 Yay Or Nay?<\/a><\/p> \n

Real estate<\/h3> \n

\"\"<\/i><\/b><\/p> \n

Between 2016 and 2017, there\u2019s an average growth of 2 real estate billionaires EVERY week. Therefore, it\u2019s not a surprise that many people are rushing into real estate investment.<\/p> \n

However, if you\u2019re a novice investor without the skills or knowledge, taking a loan for this purpose might turn into a bad debt quickly. Therefore it\u2019s imperative that you know the basic tenets of property investment:<\/p> \n

Last Resort: Ask for help<\/p> \n

 Regardless, it\u2019s always easier said than done, especially when it comes to money matters. Therefore, if you ever find yourself going down that slippery slope of debts, always seek for help!<\/p> \n

You can do so in two ways:<\/p> \n

    \n
  1. Contact your loan provider\/bank immediately for negotiations. Most of them are willing to negotiate terms that will allow you to repay the loan reasonably.<\/li> \n
  2. Contact Bank Negara Malaysia\u2019s Agensi Kaunselling dan Pengurusan Kredit (AKPK), which is the Credit Counselling and Debt Management Agency. They offer FREE counselling and will assist you with debt problems personally. More info on AKPK here<\/a>.<\/li> \n<\/ol> \n

    If you need more help determining which loan suits you best, here\u2019s a tool developed by CompareHero.my<\/a> that compares loans and interest rates from numerous banks:<\/p> \n

    What is a bad debt?<\/h2> \n

    Bad debt is characterized as a type of debt that does not add any financial value to your life. Aside from that, bad debt can also be one that costs you more money in the long run. Other characteristics of bad debts include:<\/p> \n