Is Debt Ever Good?

The normal answer is simple. Before you start investing your money, you should clearing off your debts. Because debts incur interest and it can derail everything in your life.

But many rich people use debt as a leverage and they advocate it. So, who’s right?

Is debt ever good?

Debt For Education

When you use debt for a surefire way to increase your returns then it’s a good deal. The best example is often education. If you are confident in your enrollment, then you will use the debt to get the education you want. And then that education will get you a high paying job. And boom, you will be debt free and you will keep reaping benefits for life.

The trick is to not take lots of education debt for long years. Education loan against collateral is a bad loan.

You should get unsecured education loan based on your performance. And the liability should be with you when and once you get the job.

Because if that’s not the case, then you are signing off a personal loan in disguise of educational loan.

How Do Rich Do Leverage

Rich people have avenues where they can double or triple their money. And so they can take a short term debt to have more capital. Deploy them, get the profits and pay off the loan.

Of course, it’s still super risky. And therefore not advisable for most of you.

Stick to leverage in skills, networking or experience. Else, debt will come to bite you and you will regret it.

I Am In Debt, Should I Invest?

You might have read that it’s better to invest early to reap the benefits of compounding. And while it’s theoretical true, it’s not practically true.

That’s why if you are in debt, you should first clear off your loan. And only then move to the next step of securing the necessary insurance. And then only then - invest your money.

Should I Take Unsecured Short-term Loans

There has been a rush of apps which provides you with quick loans. Often the interest rates are more than 20% but you would be unaware of the deal.

For example, they will say the interest is only 1000 rupees on 10000 rupees for 6 months. It might seem small amount. But always calculate the percentage.

In above example, it’s yearly interest of 20%.

That’s a lot and often you will miss such things.

Conclusion

Debt can be a tool to use your money and other’s money to it’s full potential. A leverage in it’s true sense. But for most of us, leverage is a foreign concept.

And as such, you should avoid debt at all cost unless it’s for education, experience or a network which all of them should be worth more than the cash you are taking the loan for.

And also, you should always read the documents for any terms you might miss and later repent.

What’s your debt story?