How to Use Debt to Fuel Your Investments
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U.S. citizens have $15 trillion in household debt. Within this astronomical number, there are both good and bad loans. When people borrow and spend the money on something that won't appreciate in value (often with no other choice), they've taken on bad debt. But when it's used to invest in something that appreciates more than its borrowing costs, debt can be a good thing.
Businesses use debt all the time. Apple (NASDAQ: AAPL) has over $100 billion in debt, which it reinvests in new products and generate profits. With good credit, you can utilize good debt for yourself, too, the same way a business does. You simply need a secured loan with predictable and manageable cash flows. By borrowing at a low rate (3%) and getting a higher rate on your investments (8%), you can earn an additional 5% on your money. Borrowing to invest can enable you to earn more money, without needing a higher paycheck.
Source Fool.com
