People who manage to take out more credit than they can pay back and then use that debt to live are in 'bad debt'. Good debt on the other hand, is the sort that has a date by which it will be paid off. Someone who has savings but doesn't want to dip into them might take out a 'good debt' loan. Equally, someone who receives guaranteed bonuses might take out a Payday Loan to spend a small portion of those bonuses early.
In recent years a certain type of loan became very popular in the US. This loan was called the self-declaring or no documentation loan and because people could say they earned any amount they fancied, they were nicknamed 'liar loans'. This kind of
Loan was intended for people who were self- employed. However, anyone could get them and in they did, in their millions, borrowing way beyond their means, with no chance of ever paying their debts back.
This meant that US banks had given money to people who couldn't pay them back, they had lost money.
clipped from: www.paydaynextday.co.uk