What is bad debt? Bad debts are those that drain your wealth, are not affordable and offer no real prospect of ‘paying for themselves’ in the future. Bad debts are also likely to have no realistic repayment plans, and are often run up when people make impulse purchases of items they don’t really need, or borrow money to pay every day bills. If you can’t afford to borrow the money (for example, you aren’t sure you’ll be able to make the monthly repayments) it is definitely a bad debt. Examples of bad debt Here are some examples of things you should think seriously about getting into debt for. If you can’t pay the debt off in the very short term, it’s probably better not spending the money. A luxury holiday you can’t afford: a luxury holiday can be a trip of a lifetime, but is best avoided if it’s accompanied by a lifetime of debt. Instead of getting into debt, try and save up first, if necessary reworking your plans so you can still take a holiday, but one you can afford. A brand new car you don’t need: If you don’t need to buy a new car, think twice about it. New cars always lose their value and if you lost your job for example and you couldn’t keep up the repayments, you might end up with a loan for more than you could sell the car for. That means you’d have no car but an outstanding debt (and interest) to pay. Borrowing money to pay bills and or other credit: if you’re struggling to get to the end of the month you can get free confidential advice, which will help you get your finances back on track.