Why borrowing money can be a good thing

MANILA, Philippines - Getting into debt is a situation that most people would rather avoid. However, there are some instances when getting into debt is unavoidable – and actually good for you.

Consulting several personal finance books, one will find that not all debts are bad – there is such as thing as good debt. A debt is considered good when you expect to get a much higher return from the amount you originally borrowed.

Getting a college education, buying your own home, and growing your own business — these are the types of endeavors that make getting into debt worthwhile. Let’s go through each one of them.



Securing your future

Getting a college education is a costly pursuit. Depending on the university, tuition fees per semester can go as high as P75,000. Such amounts do not include other related expenses such as books, meals, and transportation. This assumes that you are looking at completing a degree in the Philippines, and not overseas, a scenario that will mean at least double the cost.

If you factor in the four years it takes to finish a typical college degree, then you are looking at spending anywhere from P160,000 to P600,000 on tuition fees alone. Some families may find such amounts burdensome, especially those that have several children, and may inevitably take out personal loans to finance their children’s education.

The cost of taking out a loan however, pale in comparison to the infinite rewards of a college education. Rather than thinking of college education as an expense, look at it as an investment. Graduates of information technology, for example, earn anywhere from P30,000 to P60,000 from the get-go.



If you consider all the costs plus interest if you had to take out a loan, the total may be earned by the new graduate in less than two years.

More importantly, a college education opens many doors of opportunity. Apart from giving the graduate the right set of skills and expertise to excel in his chosen field, it is also in college where he gets to build his network of friends and acquaintances. This is a valuable asset that may contribute to his future success.

House Debt

Buying your own home is another worthy endeavor that can be classified as good debt. Apart from providing you with a roof over your head, your home also makes for a good investment as it increases value over time.

Looking at historical trends, you can expect your home to appreciate in value by 3 to 5 percent annually. This is far better than the 2 to 3 percent that you get from savings accounts and certificates of deposits. And while stocks and bonds offer better yields, there are few other investment options where you can actually borrow against your capital.

If you are looking to get the most out of your money, you must remember three things when it comes to real estate: location, location, location. There are hot-ticket locations today with land values experiencing double-digit growth over the past few years. These values have no way to go but up, with Manila’s growing popularity as a real estate investment destination in the global arena.

Buying your own home is a momentous decision, so before you take the plunge, check your level of commitment and means to pay. At most, you should only dedicate about 20 to 25 percent of your monthly income to home payments. Make sure too that you can shell out at least 20 percent of the purchase price as down payment.

Business Debt

Last but not least, there is what we call business debt. These are borrowings related to growing your own enterprise, which could ultimately translate to better profits for your company.

But of course, you have to be very discriminating as to why you need to borrow money in the first place. A piece of equipment that can make for efficient operations or inventory that you can dispose of quickly to improve cash flow—these are moves that can give your business a boost.

However, if you are going to borrow money just because you want to move into a nicer looking office or because you want to purchase new office furniture when the existing ones work just fine, then forget it. It is also important not to rely too much on borrowing to grow your business; finding investors is the better option.

The most important thing to remember about a good debt is that it’s still debt. At the end of the day, a good debt represents an obligation that you must fulfill. If you do not do so, then it will inevitably turn into a bad one.

source: www.abs-cbnnews.com

How to Create Wealth With Debt

On the surface, this seems like an oxymoron. How could you possibly use debt to create more money? It actually isn’t an oxymoron, but you’re going to need to change your perception of debt and classify into two different categories for this to make sense. There are many ways that going into debt can actually end up securing your future, just as there are many ways that going into debt will ruin your future. Let’s look at both to discover how to turn your debt into wealth.

First, let’s discuss the kind of debt that you are probably most familiar with. Bad debt is the kind of debt that most of us get into after overspending on things that we really don’t need. It’s easy to get caught up in commercialism and want to have all the things that we think we deserve. Many of try to live like millionaires on a small percentage of their budget. With poor management, debt quickly grows out of control and before long, we find out that we are in way over our heads. Bad debt is very common, especially among people who are just starting out and have yet to learn this very valuable lesson.

The second kind of debt is much different. This is the kind of debt that you use to invest in something. The first kind of good debt you’ll probably get into is your home. While it really doesn’t have many measurable returns, unless the property value increases, it does have emotional returns and serves as a good lesson in how using debt can help you get better off in the long run. Think of this as an introduction in how to use debt to grow wealth.

There are many ways that you can leverage your debt to start creating alternative streams of income. For example, let’s say that you are living paycheck to paycheck and you have the opportunity to invest in a stock that is destined for greatness. You may have a couple of bucks put aside, but it’s barely enough to buy one share. You can let this opportunity pass you by, or you can leverage debt to help you take advantage of this future stream of income.

What’s better – going into a little debt to reap big returns or spending the rest of your life wishing that you had the money way back when before that stock took off? Managed properly and used for the right reasons, debt is a very powerful tool. If you want to make money, you are going to have to have money. Unless you came into this world with a silver spoon and a trust fund, chances are you don’t have a lot of it just sitting around. That doesn’t mean that you can’t become wealthy.

By leveraging debt and using it well, you can easily achieve your dreams of greatness. Just make sure that you don’t overextend yourself or make bad decisions.

source: richcreditdebtloan.com

Getting Rich While Paying Debt Off

One of the wisest things that you can possibly do this year, if you are not already doing it, is to become debt free. Here is something that you may not currently be aware of: Gaining a control over your finances that you did not previously have could actually make you rich. The process alone of sitting down and finally making a legitimate and concentrated effort on cutting down your spending while increasing your income can actually force you to take a long hard look not only at your situation, but also at things that you can do to get yourself out of debt, eliminate the potential for future debt and ways to actually make you rich as well.

There are a wide variety of instances out there involving people that found not only a way that would allow them to get out of debt, but also with it, a way for them to really and truly begin to build up wealth for the first time ever, now that they have a new-found power over their income and finances. First and foremost, one of the biggest ways that you can create wealth by getting out of debt is by improving your credit score, which will make investing in a home or other investment options significantly easier in the long run.



This is a remarkably advantageous endeavor to undertake, because getting out of bad debt and getting into good debt is the right way to build wealth. The kind of debt that we are talking includes but is not limited to purchasing homes and purchasing other types of assets that specifically work to improve your income. If you build a better credit score, then you will finally find that it is significantly easier for you to create an investment portfolio that is real, and that is really and truly benefiting you for the first time in your life.

The leverage that real estate is capable of affording to its investors is often sadly overlooked by the average person. If you have a credit history and credit score that are solid because you have gotten out of debt, then you too will find the chance to participate in the lucrative real estate market. This is where real and true wealth is capable of coming from. So if you want to become wealthy by way of smart real estate investing, then you need to be willing to make the decision to pay off all of your consumer debt so that you can invest in the positive type of debt and stop falling prey to the negative type of debt.

The decision to pay off your consumer debt is one of the smartest decisions that you can make this year, and one by product of this process is that you will finally be able to generate some real wealth when your credit score and credit history reflect your lack of consumer debt.

source: richcreditdebtloan.com