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Is there such a thing as good debt and bad debt?

UK households now have on average nearly £2,000 of credit card debt. In this article we explore how good debt vs bad debt and the grey areas in between.

In this article, we are going to discuss what debt is and the various different types of debt that are available to us. Although we tend to view debt as an inherently negative aspect of finance, the reality is that for most of us some debt is necessary: it’s unlikely that you will go to university without a student loan or buy a home without a mortgage.

But first, what is debt? Debt is money that you borrow from a company or person (the lender) and are required to pay back over a period of time. Typically, the lender will charge interest on the amount borrowed, which is how lenders make a profit. Interest is typically expressed as an annual percentage.