What with all the talk about bad debt and the current massive failure of so many housing loans and the consequential implosion of the financial institutions that financed them, you can be sure that debt loans, of any kind, will be harder to come by. Even buying a vehicle will be tough in the future unless you have cash.

Frankly, in times like these it is better to have no debt at all. But if you were to have any kind of debt, it would have to be "good" debt, as it is called.

Just what is good debt? Good debt is when a loan is based on tangible assets, like a home, boat, car, etc., or any kind of real estate. It is something that could be seized and sold to pay-off the outstanding debt should the owner default on the loan.

Another kind of "good" debt is when you take out a loan to invest in an asset that generates income and increases its worth over time. Again, this could be a rental home, a business or an investment but it can expand to mean anything that generates positive cash flow, where the profit more than pays for the monthly payment. Investors and business owners get this kind of loan, although it usually is initially secured on something tangible.

On the other hand, by now you may know what "bad" debt is. A bad debt is any debt that is based on something that was unsecured, immediately consumed or never tangible. An unsecured home loan is a loan assuming you will be able to pay for something based on future income. Here is our biggest problem. Liberal lenders who made loans to folks who would not otherwise qualify for a home loan are tasting the bitter medicine of failure.

Possibly the worst kind of bad debt would include buying dinner out (consumed), gasoline for the car (consumed) or a vacation to Hawaii (never tangible). Typically, bad debt is racked up on credit cards that were used to buy "stuff" - things like stereo equipment, skis, "toys"; even food and such, that really couldn't be seized and sold at auction.

But just how can one expect to get a home or afford to buy the things we so enjoy? Simple - like our parents and grandparents did - save for it. It is far wiser and safer to buy things we can afford and not extend ourselves through debt. How much better it would have been to have saved up a substantial down payment to buy a home, using good old fashioned discipline, than to now be suffering the loss of a home due to an unwise promise to pay.

Like a child who was warned not to eat too much by saying, "Your eyes were bigger than your stomach", many consumers are feeling the pain of biting off more than they could chew. Unfortunately everyone, not just those left without homes, will be suffering due to the fallout of unwise lending practices.