Can I use debt to get Wealthy?

Posted: 9/11/2015

Debt usually has a bad rap.  So how can you use it to get wealthy?  Is there a rule of thumb when it comes to using your debt to accumulate more wealth?

There is 2 types of debt, Good and Bad Debt

Good debt is the type that makes you money if invested wisely, like real estate.

Bad debt is the type that does not add value to your life, like credit card debt.

So now that you know the types of debt, how can you use this to your advantage?

Invest in an asset

Although we usually consider an asset to be a property, an asset can also be a car or other larger items from which you can derive future benefits from. 

Taking a loan to finance a property is always much better than financing a vacation.  On the flip side, although financing a car won't make you rich, if you need a car to get around and drive the kids, then this is a smart investment because it'll improve your life.

The key however, is to invest in something from which you will get a financial benefit from in the future.  Land, homes, or businesses are the ways to use debt in order to get ahead. 

Use Good Debt to Pay off Bad Debt

What if you already have a lot of bad debt?  Ever considered obtaining a Home Equity Loan? This low interest loan which is secured by your property can help you pay off your high interest credit cards and loans while paying almost half or less in interest. Although you will still have the debt, more of your monthly payments will go into paying your capital (debt) and less into the interest you accumulate.  This means you will pay off your loans much faster. 

Debt is a means to an end; it should not be controlling your life. Use it as a tool to get ahead in life and achieve your financial goals.  This is why managing your debt strategically is very important.

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