While being in debt is never ideal, some types of debt are better than others because of the effect the debt can have on you or your net worth. To reflect this, debt is sometimes broken up into “good debt” and “bad debt.”
“Good Debt” is debt that is an investment back into yourself or that increases the value of what you own. That could include things like student debt or things that can grow in value over time such as a mortgage or investments.
"Bad Debt” is when you borrow for something that you are losing money on. This could include things like credit card purchases for clothes or food and payday loans. Because of how quick cars lose value, auto loans often walk the line between “good” and “bad” debt.
The main difference between good and bad debt is whether the investment will appreciate and grow in value or depreciate and lose value.
That being said, even if your debt is technically “good,” that doesn’t mean it won’t still end up hurting you if you become unable to make your payments.