4 Unexpected Ways Debt Can Actually Be a Tool, According to Experts
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Debt has gotten a bad reputation. But the truth is, you’d be hard pressed to accomplish certain things without it. For example, the vast majority of homeowners must take on debt to purchase a house. The same is true for buying a car.
To improve your financial wellness and accomplish your goals, you’ll often need to make some kind of financial investment upfront. Whether it’s paying for an education that can boost your job prospects down the road, or investing in assets to help grow your business, unless you were born wealthy, these things will likely require debt.
Despite all this, there’s still a strong stigma surrounding debt, leading many people to believe all debt is bad. We spoke to Natalia Brown, Chief Compliance and Consumer Affairs Officer at National Debt Relief. She says there are many reasons this belief exists.
“We may have watched our parents or someone close to us have terrible experiences with debt, lack of overall financial education, believing credit is not easily accessed and not knowing the benefits of debt when leveraged appropriately,” she said in an email. “These stigmas are unfair, because debt can be leveraged in ways to improve financial health.”
Here are four ways you might not have thought about that debt can be used as a positive tool, according to experts.
1. Real Estate Investments
According to Brown, one of the biggest ways to leverage debt is investing in real estate, and thus increasing your net worth. For example, using debt to purchase a rental property generates income and keeps the mortgage paid without additional expense, if the rental income exceeds carrying costs.
2. Small Business Loans
Nearly every small business needs an injection of capital to either get off the ground or finance growth. Without it, many small business ideas will never see the light of day.
“Small business loans are great ways to increase business cash flow, allowing the business to reach more consumers, increase inventory, hire more employees, etc., and thus create more revenue,” said Brown.
3. Student Loans
Brown says student loans have been a controversial topic recently, because of the heavy financial burdens they place on borrowers. However, these loans do serve a useful purpose.
“Investing in one’s education should always be a consideration, especially if the field of study has high income potential, which can be a positive in the long run,” said Brown.
4. Credit Card Perks
Many credit card companies roll out perks to attract customers. Brown says these perks are a great way to get discounts or cash back on everyday items. The key to maximizing your perks is to keep your credit card balance at a manageable level and be strategic.
“When debt is used strategically, there can be great benefits, as long as one sticks to a few principles, like paying on time and never spending more than what can be paid off within a reasonable amount of time or in full by the due date,” Brown said. “Do your own research, look at rewards, interest rates, time to pay off, low-cost balance transfers, and even customer reviews. I also recommend comparing products with different providers to ensure you’re getting the best option for your goals.”
What to Do When Debt is Holding You Back
Of course, having debt isn’t always to your advantage. If it’s keeping you from accomplishing your goals, there is relief available. Since its founding in 2009, National Debt Reliefhas helped more than 550,000 people resolve over $11.5 billion in debt.
“We primarily focus on those who have had life changes that rendered them overwhelmed with unsecured debt,” Brown said. “We help our clients by tackling the psychological, behavioral and emotional aspects of their relationship with money and give them access to guidance, tools and resources that will help them build a more secure financial future and be more prepared for the unexpected.”
Here’s how it works: First, tell a Certified Debt Specialist at National Debt Relief a bit about your situation in a free, no-obligation consultation. Then, if you’re eligible and interested in their program, they’ll put together a customized plan that’s right for you and your budget.
With debt settlement, National Debt Relief’s experts will negotiate directly with your lenders on your behalf to agree on a reduced balance, so you could pay less than what you owe and get out of debt much faster.
With debt consolidation, all your debt will be combined into one new loan, ideally with a lower interest rate. This will help you pay off your balance faster and save you money on interest payments in the long run.
National Debt Relief’s experts will help you weigh the pros and cons of all your options. It’s easy to get started here and learn more about all your options.
