Good Debt Calculator.
Run the 4-number ROI test against a specific loan, line, or advance — all-in cost of capital, expected cash-flow lift, and whether a downside scenario still survives.
Before you run the numbers.
"Good debt vs. bad debt" is the single most repeated lesson in personal-finance books — Rich Dad Poor Dad built an entire framework on the distinction — but most explanations stay qualitative. This calculator makes it a number.
The test runs four inputs against each other: how much you're borrowing, the all-in dollar cost of that money (interest + fees, not just the rate), what the borrowed money is expected to produce in cash flow, and a downside scenario in case reality undershoots the plan. If the expected cash flow clears the cost of capital with room to spare — and the downside scenario still covers its own cost — the debt is doing productive work. If the downside scenario can't cover the cost of capital, that's a hard stop regardless of how good the base case looks.
The distinction this reveals: debt itself isn't good or bad. A loan to buy an appreciating, cash-flowing asset and a loan to fund a depreciating lifestyle expense look identical on a credit report — the difference only shows up when you run the ROI math on what the money is actually for.
Run your scenario.
Expected incremental cash flow is 3.5× the all-in cost of capital, and the downside scenario still services the debt. The math points to a productive use of funds.
See a worked example
A $50,000 advance costs $12,000 all-in over 12 months, and you expect it to produce $5,000/month in incremental cash flow.
ROI ratio = (monthly cash flow × months) / all-in cost
= (5,000 × 12) / 12,000 = 60,000 / 12,000 = 5.0×
At a 30% downside (cash flow comes in 30% below plan), the use of funds still produces $42,000 against a $12,000 cost — well over 1.0×, so the downside scenario survives too. That combination — strong base-case ROI plus a downside that still covers its own cost — is what "good debt" means mathematically.
Educational tool, not financial advice. This models a single use of funds against your own cash-flow estimate — it doesn't account for taxes, opportunity cost, or changes in your other revenue. Final terms on any credit product depend on the lender's underwriting. Run multiple scenarios before committing to a specific loan, line, or advance.
Taught in these books.
Common questions.
What counts as "all-in cost" for this calculator?
Every dollar on top of principal you'll pay over the term — interest, origination or draw fees, and any recurring charges. For a credit card or line of credit this is total interest paid; for an installment loan it's total interest plus fees. Understating this input is the most common way people talk themselves into a bad deal — always use the full cost, not the headline rate.
Why does the downside scenario override a good base-case ROI?
Because plans are optimistic by default. A loan that only pencils out if everything goes exactly as projected is fragile — the downside test asks whether the use of funds still covers its own cost of capital if revenue or cash flow comes in meaningfully below plan. If it can't, the debt only looks good because the plan hasn't been stress-tested yet.
Does a high ROI ratio always mean the debt is worth taking?
It's necessary but not sufficient. A high ROI ratio combined with a downside scenario that fails still reads as risky — the math in this calculator treats downside survival as a hard gate precisely so a good-looking base case can't paper over a fragile one.