The answer might surprise you.
- Dave Ramsey is not a fan of consumer debt.
- He thinks it’s best to avoid borrowing money at all costs, even to buy a house.
We all have these things going through our skin. For some of us, they are noisy neighbors. For others, they are slow drivers.
If you ask personal finance expert Dave Ramsey what one of his biggest pet peeves is, his answer will likely be consumer debt. Ramsey is very opposed to the idea of owing money to a lender in any form. Not only does he think consumers should ditch credit cards and pay for purchases with cash, he thinks it’s ideal to buy a car rather than having to take out a car loan.
Ramsey is so opposed to consumer debt that he even advocates buying a house with cash rather than taking out a mortgage. (Granted, Ramsey acknowledges that many people can’t buy a home outright, but in his mind, it’s better not to owe money on a home than to have a loan hanging over your head.)
During this time, you will often hear consumer debt broken down into “good” and “bad” categories. Credit card debt is generally considered the wrong kind to have. Sometimes it’s unavoidable, like when you face an emergency expense that you don’t have the money to cover. But all things considered, credit cards are notorious for charging a lot of interest, and too high a balance could hurt your credit score. And so it’s easy to see why credit card debt can be considered a bad thing.
Mortgages, on the other hand, are generally considered a good type of debt because they tend to come with reasonable interest rates and eventually allow you to own a valuable asset. Car loans can also be considered a good type of debt, because although cars do not tend to appreciate in value, they are an essential purchase that in many cases allows the people who drive them to earn money (after all, many of us need a car to get to work).
But if you ask Dave Ramsey what kind of consumer debt he thinks is the right kind to have, he may have a different answer than you expect.
No debt is good debt
Ramsey recently tweeted that the only good debt is debt that is PAID. (Yes, he capitalized those words, and it bears repeating.) Or, to put it another way, there isn’t a single kind of debt that Ramsey would consider a good kind to bear.
On the one hand, there’s something to be said for not owing anyone money and not accruing interest on any purchase you make, whether it’s a phone, furniture or a house. On the other hand, Ramsey’s anti-debt stance may be too extreme for the average consumer. And so it’s important to take its debt-free concept with a grain of salt.
Of course, ideally, it’s best to avoid credit card debt. But should we blame ourselves for having to take out a mortgage or finance a car with a car loan? No way. Most people can’t just pour money on the head of the barrel for those big purchases in life, so if you have to go into debt, it’s worth doing so so you can get places and have a roof over your head. above your head.
What if you already have credit card debt?
If you have a balance on your credit cards, the sooner you pay it off, the better. But should you rush to pay off your car or your mortgage? Not necessarily.
If that debt is affordable, there’s no need to cut back on your non-essential expenses and push yourself to do three hustles just to get rid of car loan or mortgage debt. Even though Ramsey will tell you that these aren’t good types of debt (because none are good), the reality is that they really aren’t that bad. And as long as you track your payments, you don’t have to worry about borrowing money to buy a major asset that’s essential to being a functioning adult.
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