Bitcoin Investment: Good Debts vs Bad Debts

[el kaka22]

Poor people have hard time living, and they are barely able to buy things that rich do not even care about when buying. Just to give an example, buying the latest iphone is a stupid move for a poor person, why would you spend that much money on a brand new phone, there are a lot cheaper options, right?

But buying 10 brand new iphones would not even move a dent in a rich persons wallet, they do it, they live like that, they buy a new phone every time the old ones memory ends, instead of deleting photos, they buy a new one, they are that rich. So, it is normal that rich people only get a loan for smart stuff, but poor people have to get for bad stuff as well, it's normal.

[Adams0001]

Every part of life has benefits and drawbacks. For the average person, carrying some debt has become the standard.
While the majority of people are in debt, it is critical to recognize that not all debt is made equal. Debt, when used irresponsibly, can have disastrous financial repercussions, but when managed properly, it can also be a tool for wealth creation.

You may find yourself in a situation where you must pay. The payment is greater than the asset's value because it is stretched out over a long period of time at a high interest rate.

Taking on too much bad debt at this time may make digging yourself out of a hole later on more difficult.

[lionheart78]

Would you classify borrowing money to invest in Bitcoin as good debt or bad debt?

There are also two cases to consider in considering whether borrowing money to invest in Bitcoin is a good debt or a bad debt. 

It is a good debt if we borrow money in an event where:

1.  Bitcoin crashes to its bottom:  accumulating Bitcoin at its bottom is the best way to take profit.
2.  We are strong-willed and do not panic when a sign of market collapse or a bitcoin market collapse happen but keep holding Bitcoin
3.  We have a good plan on when to take profit and not just hold Bitcoin blindly.
4.  We have the capability to pay the borrowed money regardless we sold our Bitcoin or not.

It is considered a bad debt if:

1.  We buy BTC when it is on its ATH or peak and has no patience of waiting for another cycle making us to sell our holdings at a loss.
2.  We have weak hands and have no faith in BTC.
3.  Invested on Bitcoin because of the hype.
4.  Incapable of paying the borrowed money which can force us to sell BTC at a loss to be able the pay the debt on time.

[Die_empty]

There are bad debts and there are good debts. Bad debts- loaning money to buy a car that won't be used for business ( Uber, Bolt). Loaning money to buy a pair of shoes, clothes, a piece of furniture etc.

Good debts - loaning money to purchase something that would appreciate in value over time. Real estate, precious metals, commodities etc.

They say poor people have bad debts and rich  people have good debts.

One of the popular pieces of advice you'd hear in the Bitcoin space is to never borrow to invest in it.

Despite the volatility, our hope is that Bitcoin will appreciate in value.

Would you classify borrowing money to invest in Bitcoin as good debt or bad debt?

The bitcoin market is highly unpredictable that's why people are advice not to borrow or use a loan to buy the currency. There are some investments that are less volatile such as real estate. People take loans to buy or build their own houses and it doesn't seem to be a bad investment because properties appreciates. Taking a loan and investing it in Bitcoin is not a bad loan but it is not the best method of seeking finance to invest in the sector. You don't need to invest a high sum of money you don't have in Bitcoin, but gradual but consistent savings can help you invest in Bitcoin without borrowing. If you use a loan to buy Bitcoin, and the price keeps dropping, you might develop high blood pressure before the next bill run.

[odunybiz]

Would you classify borrowing money to invest in Bitcoin as good debt or bad debt?

To me investing in Bitcoin using loan stand neutral between the two. This is because it's risky. Knowing the volatility of the market. One may end up in joy or sadness. It's not advisable to loan money for any business that one isn't certain of it's success.

[ginsan]

I think the debt can be avoided if there is no urgent need.  I mean even if you take a loan to make an investment it's not too wise for you to do because if you get a passive income per day/week/month you can set aside some of your income to invest in the long term it's wiser than you take a loan.

Addiction to taking loans will also have a negative impact in the future because things that we don't want can happen in the future and that will prevent you from being able to pay off the loan. So my advice is it's better to live without debt and have no burden in everyday life.

Indeed, some of them are quite successful by using loans to manage their financial side of the business they manage or they are lucky in every way.

You are telling the truth because borrowing debt to invest is not a wise thing. I agree with your opinion because roughly if we assume someone takes a loan and puts all the loans for bitcoin investment when the price is high, let's say he buys at $50k and the current price is $28k, of course he will be burdened for making payments on his loan. But on the one hand I also agree that those who are good at taking advantage of opportunities will be able to turn money quickly in trading with the main capital being loans.

As OP said where someone can say a loan made in investing in bitcoin as a good loan and it can also be a bad loan it just depends on how they manage it as well as possible to make a profit before the payment period arrives.

[carlfebz2]

Would you classify borrowing money to invest in Bitcoin as good debt or bad debt?

Doesnt matter much whenever you do have some debts because of some investment, the most important thing on here is that you should really know on when to pay up those due dates without relying into your
investment returns or profits.

If you do have other sources on which you could be able to patch up those payments then it should be fine. Getting some loan or debt to make some re-rolling into your investment is never been bad
as long you do know on handling out your finances well then i dont really see any problems.

Things do go bad if you do make use of those money in a wrong way which we know that it isnt something recommended.

[Yatsan]

On my viewpoint, there's no good debt. Indeed loans could be used to start your own business; process is allowing your business to pay your loan until the property itself remains as your profit. Problem is looking for that business which would generate assured profit or returns. Apartments? Properties? Could possibly be, but think of the rate of return; it would be long for such properties because rent is on a monthly basis. It is easy to idealize the process but on the actual it is not. You have to minimize the risk. And if you cannot sustain what you are using your loan with, you'd be at risk. I acknlowdge this process of using loan to earn profit but I myself is fully aware that it would be too risky and I might end up being in bigger dept.

Right now, I prefer using my own money to atleast give me an allowance from the risk. In such way, it would prolong my time getting back with the amount I would be investing into something.

[boyptc]

Please bear with me with what I understand about this matter. Good debt isn't just all about that you'll be able to use it on a business and other things that will be cultivated over time for which will generate profit on your own sake.

I think it's all about cash flow. Like the typical understanding we've got about good debts is you borrow money and then invest it on a business, that's it. But we're forgetting that when someone creates a business, the important thing on it is being liquid and the cash that flows within the cycle of that business so, it's an active thing.

Whilst in investing in bitcoin, you gotta be passive and wait for the right time on it. Well, it can still be said as a good debt since there have been college loans and we're also investing our future with our education and we wait until we're able to use that education we've learned.

So IMHO, it's either both. But I agree on him arimamib; if you can avoid to take a loan just avoid it in any case even if the cause is good like investing in bitcoin.

I think the debt can be avoided if there is no urgent need.  I mean even if you take a loan to make an investment it's not too wise for you to do because if you get a passive income per day/week/month you can set aside some of your income to invest in the long term it's wiser than you take a loan.

[Aikidoka]

Investing in bitcoin with borrowed money may be profitable over the long term, but I personally would not do do that due to the lack of certainty. It's not my own money to invest, so I wouldn't take the risk of using someone else's money to make more money. For me, this type of investment would be obviously a bad debt. I consider a good debt to be when you need money and know that you can earn it back in a short amount of time, such as a few days to a few months. It's important to use borrowed money for something necessary or urgent, rather than investing in bitcoin or something that isn't essential.

[yhiaali3]

Yes, there is a difference in general between good debts and bad debts, but we have to be realistic that the debts of the poor and the rich cannot be compared. It is not fair to classify the debts of the poor as bad debts because they are forced to do so.

Yes, they borrow money to buy food, clothes, shoes, and other necessities, but what do you do if you are poor and do not have money to buy the necessary necessities to meet your family's expenses?

You are forced to borrow to provide for these needs, even though you know that it is a bad debt that you have to pay in the future.

[Faisal2202]

Would you classify borrowing money to invest in Bitcoin as good debt or bad debt?

You raised a good point, according to Investopedia your definitions of good debt and bad debt are totally correct, but if we want to declare one thing we are going to buy using the loan as good debt or bad debt. For that, we need to consider some key points in these debt natures. Like:

1. The purpose should be to earn money by investing that loan in business opportunities as a good debt.
2.Less interest loan is considered as good debt.
3.Return over loan money is a good debt.
4.A loan with less strict terms will also be a good debt.
5.Good debts have a longer time to pay loans.
6.Most importantly, the borrower must have a backup plan if the loan money is not able to generate return over loan money.

For Example, a person earning 3000$ every month in a government job and wants to take a loan of 90,000$ to invest it in BTC for the long term, for 4 years maximum, and he buys BTC at an average of 25k$ and he has to pay his debt after 6 years. Then I can say investing loan money in BTC is considered good debt.

Margin trading could be another example of good debt (for BTC) as the borrower at last pays the loan money. A debt will be considered as a good one if the borrower took all the measures to meet the consequences in a better way and had a better plan.

[Sarah Azhari]

Would you classify borrowing money to invest in Bitcoin as good debt or bad debt?

I don't agree if people (who don't understand the deal in) borrow money to invest the risk value assets. Even if as good or bad debt, it's the same as always they will get risk if not in good hands (understand how it works). I have a friend (from Minangkabau) who is very good at trading offline from lending money, but going bankrupt after trading forex online and got debt arrears until today. so just be carfeul for your step.

[awik p]

I think it depends on the background of the person borrowing it. it can be said to be a good debt if the borrower already knows and has good knowledge of bitcoin investment, so that all risks and targets have been calculated beforehand. it is said to be bad debt, because most people want quick and multiplied profits, while there is no capital, so they dare to borrow, without careful calculation of risk, and usually people who are like this will be attacked by their psychology which ends up selling panic, and the result did not live up to initial expectations

[benalexis12]

   Most people know that it's not bad to take a loan no matter what the reason is whether it helps us or not, why would we take a loan if we pay it on the due date that was discussed, it's okay for me.

   Because of the reasons for the debt here, the debt is good or bad. It seems that it is up to the interpretation of the individual how they will give it a negative or positive view. So for me, investing in bitcoin has a risk result and a good result, that's what I know and maybe most people here also know.

[xSkylarx]

Neither because depends on the preference because first it is a bad debt if your investment is not profitable meaning you are lossing money and you cant pay it back since that is only your main source of income. It would be a good debt if tou can still pay it even if you lose your investment. Overall it is still not good to get a loan just for investing money to something that it is not 100% that will get you profit but unless you are really risk taker

[lienfaye]

Would you classify borrowing money to invest in Bitcoin as good debt or bad debt?

Good debt. Because it's an investment, you'll gain if everything will go as planned. However, as we always say, it's not advisable to borrow money to invest in Bitcoin unless you have a back up plan wherein you can still pay your loan even the outcome of your investment is not good. In that case, you can take a loan as long as you're not relying alone with the profit in your investment.

Borrowing money is not bad if your purpose is to use it for investment. But keep in mind that every investment is risky and not guaranteed. Hence, it's not for everyone who are not responsible borrower and doesn't know what mess they're getting into just because they want to invest.

[isaac_clarke22]

~

I classify that as a bad debt. To be real, "hope" cannot pay your loan back. Technically it is still a good debt from the definition since it earns money overtime anyway, just like how businesses gives a percentage of return or the earnings although the volatility of the market is what makes it somehow of a bad debt.

I can't make a promise that I would pay back a loan if the one that generates revenue is unstable. I would prefer my own money that I can afford to lose, so that I would have no problem in the end. I don't want my earnings to be just be used to pay the loans I used.

[Cuenta Alternativa]

There are bad debts and there are good debts. Bad debts- loaning money to buy a car that won't be used for business ( Uber, Bolt). Loaning money to buy a pair of shoes, clothes, a piece of furniture etc.

Good debts - loaning money to purchase something that would appreciate in value over time. Real estate, precious metals, commodities etc.

If you listen to whoever popularised the difference between good debt and bad debt, these examples do not give you good debt, as they do not give you cash flow. Good debt puts money in your pocket, and investing in real estate or gold does not put money in your pocket. In the case of real estate it would, but if you rent it and the rent you get paid is higher than the mortgage you pay plus the other expenses of the house.

If you are going to buy gold or other commodities, they definitely do not put money in your pocket, so going into debt hoping for capital appreciation would not be a good idea.

The same could be said about bitcoin, but due to its high profitability, it could be a good move due to capital appreciation, but it is not advisable for the typical retail investor. An example of someone who goes into debt to buy bitcoin is Michael Saylor with MSTR, who does not stop making regular bitcoin purchases, often going into debt, but with a very studied and controlled debt.

[karmamiu]

<snip>

It is a good debt if we borrow money in an event where:
4.  We have the capability to pay the borrowed money regardless we sold our Bitcoin or not.

It is considered a bad debt if:
4.  Incapable of paying the borrowed money which can force us to sell BTC at a loss to be able the pay the debt on time.

Exactly. This alone is already a huge difference between rich and poor people. By poor you mean those who are on lower class household and below right? if that's the case, thinking about getting in debt alone is already bad. Here's an example based on my experience and from the neighborhood I have in this country, for those who are earning below minimum wage, having a debt is like digging your own grave, coz you have to accept huge interest. Most banks here in my country will only offer you a small amount of loan which someone can afford based on their wages, and what can a little amount of money do? nothing, mostly it can only be used for groceries worth 3 days or 2. If the lower-class person or below wants to borrow reasonable amount of money, he/she will have to go to private loan sectors and accept their unreasonable terms and conditions specially in interest rate, which will only lead them being burrowed by debt day after day. This is one of the reasons why most of my neighbors wanted like a get rich quick scheme, since if they'd wanted to borrow money, they'll have to pay the amount and interest in fast manner and the faster they pay it off, the easier for them to get out of the crisis.

Getting in debt for me varies from person to person and more importantly varies depending on where the country is. Maybe the definition of HOBO in your country is already what we considered lower class here, how much more the poorest of the poor? Thinking about investing in that situation is no longer in their options.