New words for this lesson
Say them out loud. Then use one word in a sentence.
A course or a pair of sneakers?
Two people borrow €300 from the same bank, at the same rate. One pays for a training course. One pays for designer sneakers.
🤔 What exactly is different here?
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The loan is identical — same money, same repayment, same cost.
What differs is what you get for it: something that can last for years or raise your income, or something that is used up quickly.
There is no official list of "good" and "bad" debt. But there are good questions.
Before you borrow anything
- 1 · Does it last longer than the loan? Paying for something you no longer have is the worst feeling in personal finance.
- 2 · Could it increase my income or save me money later?
- 3 · What happens if I cannot pay one month? Late fees? A bigger debt? Someone else responsible?
- 4 · What is the total cost? Not the monthly payment — the total. That is Lesson 14.
Five borrowers
Read each one. Decide for yourself first: would you do it? Then open the answer — it gives you the question to ask, not a verdict.
🤔 Nina borrows for a driving licence course. She needs it for the job she wants.
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This can raise her income and it lasts for life. Key question: is the job realistic, and can she pay the monthly amount even before she gets it?
🤔 Tim buys a new phone on instalments every year. The old one still works.
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The phone loses value fast, and a new debt starts before the old one ends. Key question: is he ever debt-free, or is he permanently paying for phones?
🤔 Sofia borrows for a cheap used car so she can reach a job with no bus connection.
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The car is a tool for income — but cars also cost fuel, insurance and repairs. Key question: does the extra income cover the loan and the running costs?
🤔 Luca pays for a holiday with a credit card and plans to pay it back "somehow".
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The holiday is over in two weeks, the debt is not. "Somehow" is not a plan. Key question: what is the exact plan, and what does the interest add?
🤔 The Bauer family takes a 25-year loan to buy a flat instead of renting.
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This is a mortgage — the biggest loan most people ever take. The flat can keep its value, and they stop paying rent. Key questions: can they pay it if income drops, and what is the total cost over 25 years?
When debt gets dangerous
- You borrow money to pay back other debt.
- You only pay the minimum amount each month.
- You don't know your total debt.
- You borrow for things that disappear fast.
- You hide it from everyone.
🤔 True or false: "If I can pay the monthly amount, I can afford it."
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False. You can pay it today. Affording something means you can also pay it when your income drops, when the phone breaks, and when the next offer comes along.
Zusatzwissen · extra knowledge
Adults can also get help. In many countries there is free, independent debt counselling (in Germany: Schuldnerberatung). Asking early is normal — the earlier, the more options are left.