Good versus Evil . . . Debt

I set out to write this piece with good debt personified as a white night, galloping across some highlands, like I’ve only read about in 19th century English romances, covered with wild flowers of gold and red and soft yellow, dancing in a May breeze, set against a back drop of the most brilliant, azure sky. And bad debt, of course, would be a black night with red glowing eyes, riding through the lowlands of dark mystery and seductive beauty, where giant old growth trees abound and mossy crags of peat and rocks are hiding places for his victims, scrabbling along , close to the ground, hoping to escape his mighty sword (imagine sardonic laughter here). (and again here.)

But then it seemed too much like a Capital One ad.

So instead, I offer you my simple definition of “Good Debt.” Good debt is any debt accrued for an item or service necessary for basic human survival and education. Shelter, medical treatments (in America, that is, since we don’t have universal free healthcare), a car under certain circumstances, these are things worth borrowing money for, good things, good debt. Provided you can afford the home or car payments, that is, and afford them with enough money left over to pay your other expenses with cash. In my opinion, education and medicine are two things that ought to be free and should not be compromised because of budget.

Ideally we would all pay up front for our homes. But most people could never save up $230,000, or even $130,000, for a home in any reasonable amount of time while paying rent on another place. Yes, borrowing for a home is a good thing. Borrowing against your home later on, after you’ve built up some equity, well, that is never a good thing, no matter how they sell it to you. There are no easy outs of credit card debt, which is something pretty evil I’d like to look at for a minute.

Bad debt is paying more for something than it is worth because of the finance and interest rates. Pretty much all consumer debt is bad debt and most people end up paying many times over what a particular item originally cost. The credit card companies make it very easy to accrue debt, take cash advances, get in over your head. Just spend as much as you can, whether you have it or not, and then instead of paying for it with money, transfer it to another creditor or borrow the money against the roof over your head to pay. Eventually the bottom falls out, there are no more transfer options, the enticing opening rates are long gone and the fees start to multiply. It is not unusual to end up in a pile of month old mail, face down on the carpet, softly banging your head against the floor, a sinking feeling of despair sitting like so much bile in the pit of your stomach as you wonder how on earth you are going to pay all these bills, as you realize that as much as you are paying, the balances keep increasing because of the insane loan sharky interest rates and fees.

At least that is what happened to me. How I got there doesn’t matter. There is where I ended up and by the grace of my lucky stars someone turned me on to a company called Debt-free America, a non-profit debt pooling program that turned it all around for me. Real quick, what they do is take over your credit card payments, automatically deducting one lump sum from your checking account each month. Then they get the creditors to lower interest rates, forgive some fees, behave like civilized people. And in return you promise not to take on any loans or credit of any kind until your debt is paid off – for me, it’ll be 5 years, ending up in summer ’09, woohoo! They force you to pay with cash, if you break your end of the bargain, all deals are off and the credit card companies can go back to their evil ways. They are the true evil doers, by the way, but that’s beside the point.

The point is, if you are sinking in bad debt, there is a solution and it doesn’t involve another loan or moving your debt to another lender. I wonder why we don’t hear more about these non-profit debt pooling programs. Well, you’ve just heard about them, right here, so go get set up and start digging out. And then you’ll be able to qualify for some good debt of your very own!