Everyone has heard about the statistics showing how much debt everyone has. The average student loan alone is worth $37,000. People are financing just about everything; from food to furniture, phones, and cars. As scary as debt sounds – and it is – there are some times where it’s not as evil as you think. Here are five times debt isn’t your worst enemy.
You’re Buying a House
There are two ways to buy a home; saving up hundreds of thousands of dollars yourself, or taking out a mortgage to borrow the money you need. It’s a simple choice, isn’t it? Mortgages are considered good debt because they are secured by real estate and interest rates are favorable right now. A low interest rate allows you to borrow against the home for money you can invest wisely to pay off the loan.
You’re Starting a Business
Going into business for yourself is practically the American dream, but it can take a lot of money. Debt may be the ticket to entrepreneurial success. If you wanted to become a landlord for example, then borrowing money to purchase a building is a great way to get started while taking advantage of those previously mentioned low interest rates. The income from rents helps you pay back the debt as well. Of course, you should keep the risk of using debt to start a business at a minimum.
You Want a New Car Without Spending a Lot of Money
So you’ve managed to avoid debt and put away your savings quite nicely, but what if your car suddenly breaks down and can’t be repaired? You’re prepared to get a new car, but are balking at the idea of taking so much money out of your savings; the money is there for emergencies and retirement after all. This is when you should consider taking out a car loan. Get a car loan with affordable payments and don’t buy a car you don’t need and all should be well.
You’re Remodelling Your Home So You Don’t Need to Move
Your home might have been great back when you first got it, but when your family grows you may find yourself needing a bigger house. Or perhaps you have the right size house, but the bathroom or kitchen could be bigger and better. It’s expensive to move house. Really expensive. It’s much better to borrow money and remodel your home rather than take the step of moving house. Not to mention remodelling increases the value of your current home, meaning you’ll get more money when you really do need to sell.
You’re Going to College
Everyone will always talk about the horrors of the student loan, but not all of this is fair. It’s true that colleges cost too much, but the return in investment of a college degree is still very much worth it. College graduates earn an average of 56% more than high school graduates. Of course, you need to pick a good course that will really earn you money. You can also save money by going to a state or community college. Either way, a student loan gets your higher education off to the right start. Student loans are an investment in your future, and should be treated as such.
Debt Isn’t Bad, but Interest Is
It’s not necessarily the debt that’s the problem but the interest. Make sure you only borrow as much as you need to and that you don’t borrow more money than you can pay back. That’s how you avoid finding yourself in the spiral of never-ending debt. Debt can actually do some good if you’re smart with your money. Just don’t overdo it. A debt consolidation loan can be there to help you if you do find yourself in a situation where you owe too many people too much money.