Good debts; bad debts

There are good debts and bad debts.

Good debts produce return and create value, for example:

• Student loan - with reasonable interest rate and the interest is tax deductible, you can pursue higher education; and many times lead to a better career with higher income.
  
• Home mortgage - mortgage interest is tax deductible; and you get to live there or rent it out. In a long run, the property may appreciate its value.

Bad debts do not produce good return or value. You may have been on credit card debts and are having problems paying off - you are deeper and deeper in the hole.

There are gray area - what if, with a car loan, you bought a car which is a necessity for you to commute to work, to drive your kid to and back from school? Then the question is how much should you spend? You should have your budget well thought out - the down payment, the monthly payment, insurance, and possibly annual maintenance and fuel costs. In my view, if I have to get a car loan to buy a car, I'd consider buying a good quality, reliable, practical, and fuel efficient car with minimum amount of car loan.