Anyone can experience financial difficulties and fall into bad debt. This can happen with small items in a big way. Ok so you buy a 'doodad' from the computer or furniture store that gives you no money down and first year of payments are free of interest.... 6 months down the track you have done this on a few items and your life seems to be looking just great. You have some really nice things around you, then you go out and buy a new car on a personal loan. All still looks good until it is time to get that first 'doodad' paid off - the credit companies don’t care, they will just keep giving you more credit and you just get in deeper and deeper.
Another example, as funny as this sounds, your home mortgage is bad debt (kind of, sort of). Alright, you have to live somewhere, but it isn’t making any money for you unless you have a few boarders that cover the cost of your monthly payments. Then it’s good debt. However, in my world if you have to borrow money that won’t or hasn’t a chance to make you money, it is bad debt.
Say if you buy a investment property with a loan from your friendly bank and the rent doesn’t cover the costs. However, if the property grows in value much more than the costs you are having to make up each month on the loan, then this is good debt, but if that same property is not increasing in value and it is still costing you extra each month then that is very bad debt.
