Understand the Difference between Good and Bad Debt

Released  August 4, 2006
By Megan Greuling

CHARLOTTE, N.C., August 4, 2006 – When people think of debt, many instinctively assume it is always a bad thing. However, sometimes that is not necessarily the case.

“Smart debt leaves you with an asset that’s worth the cost of the credit used to get it,” said LendingTree.com President Anthony Hsieh. “On the other hand, bad debt happens when you don’t understand how the credit product you are using works, or whether you can afford the costs over the lifetime of the loan. The lending landscape has changed over the past decade, and today lenders offer a dizzying array of loan products. This has brought choice and opportunity to the market, but without basic knowledge and understanding, you can risk making bad debt choices that can plague you for years.”

As a part of its ongoing mission to empower borrowers, LendingTree offers the following guidance on the difference between good and bad debt:

Good Debt

  • Choosing a mortgage that allows you to build equity quickly and pay off your principal faster.
  • Buying a car with a large down payment and a smaller loan that you’ll pay off in just a few years.
  • Using your home equity to help your children pay for college.

Bad Debt

  • Buying a house you really can’t afford because you’re offered a mortgage with a low monthly payment.
  • Buying a car you will drive for five years but taking out a seven-year car loan for the purchase.
  • Borrowing against your home to consolidate your credit card balances and then racking up more charges on the cards.

Smart borrowing involves planning. Hsieh emphasizes that by learning how to be smart about your credit choices now, you can make the right choices for your future. For more information about good debt and bad debt, please visit the LendingTree Guide to Smart Borrowing.

About LendingTree, LLC

LendingTree, LLC is the nation’s number one online lending exchange, providing a marketplace that connects consumers with multiple lenders that compete for their business. Since inception, LendingTree has facilitated more than 18 million loan requests and $141 billion in closed loan transactions. LendingTree provides access to mortgages and refinance loans, home equity loans/lines of credit, auto loans, personal loans, and credit cards via www.lendingtree.com and 800-555-TREE.


Founded in 1998 with headquarters in Charlotte, North Carolina, LendingTree, LLC is part of IAC Financial Services and Real Estate, an operating business of IAC/InterActiveCorp (NASDAQ: IACI), which also owns or operates LendingTree Loans, LendingTree Settlement Services, LLC, GetSmart®, RealEstate.com®, Domania®, and iNest®.