Is Debt Good or Bad?

Isn’t it funny that debt is one topic that many people treat like a dirty little secret, yet at one point or the other we have all been in debt? Typically, when someone asks for a loan from family or friends, there’s this unspoken code of confidentiality that immediately comes into play. Perhaps this is because it creates the impression that you are not as financially buoyant as you would like people to think; or maybe you are so heavily steeped in it that you can’t find a way out. Question is: is it wrong to take a loan?

Either way, we have come to understand at Coralstone Capital that debt is not a bad thing; and we’re not just saying that because it is our business, we can prove it. Essentially, when you take a loan, you take money from the future to fund a need in the present hoping that your future earnings will cover the expense. This suggests that it is only sensible to take a loan when you can guarantee an income flow that you can leverage to pay back the loan and any interest accrued.

So, how do you know when debt is good? Simply put, when you are taking a loan to fund an expense that can increase your earning capacity, reduce your expenses or bring you more income, that’s good debt. If you want to pursue a Masters’ Degree, buy machinery or equipment for your business, build your own home and eliminate rent, or purchase a car to increase your efficiency, taking a loan may be the best option for you.

On the other hand, debt is bad when you are funding a consumable product or service such as travel, entertainment, luxury purchases, etc. For example, taking a loan to take a N580,000 trip to Zanzibar this summer on a N250,000 salary and an expense sheet of N270,000 every month is a bad idea. Another way to look at it is this: if you can save towards an expense, you’re better off not taking a loan to pay for it today.

There are several other considerations to be made when looking at debt. For instance, good debt can be taking out a loan to make an investment as long as the loan is at a lower interest rate than the expected Return on Investment (ROI) and the duration of the loan is shorter than the tenor of the investment. More so, if a payment that you have already factored into your budget is due earlier than expected, it is not a bad idea to take loan so far as you have also priced in the interest on repayment.

Ultimately, debt is not a bad thing when it provides a platform for economic prosperity and you have critically considered your ability to pay it back in full. Like most other things in life, it is only when it is left unchecked that it leads to a spiral
of indiscipline and financial doom. If you’re looking to take out a loan today, there is nothing to be shy or worried about. The good thing about what we do at Coralstone is that our goal is to be your go-to financial partner. Ultimately, we want to be the ones walking beside you and equipping you with the right resources to live life to the fullest; and that includes financial security.

If you have more questions about managing money where debt or investment is concerned, please send us an e-mail at or give us a call at +234(0)8169352843 or visit our website at

Coralstone Capital is your number one go to company for all your money affairs. We help people save, borrow, and invest in the most convenient and secure way. Our team is composed of professional individuals with vast years of experience in the financial sector.

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