Thats what financial writerRobert Kiyosakicalls the common advice to get out of debt.
But the definition may be a bit limited, because there are severalgoodreasons to borrow money.
No Interest Til Almost 2027?
The most obvious example is borrowing to buy a house when its cheaper than renting.
Another example is borrowing to insulate an attic, permanentlyreducing heating bills.
To Cover Emergency Expenses
This is a tricky area.
Emergencies can largely be prevented in theory.
Did you know?
Clearly, there are times when youshouldgo into debt.
Why add interest to the cost?
In general, consumer debt is all bad debt.
And since the average payday borrower has numerous annual transactions, its not likely this is true emergency borrowing.
Even the next option on our list is probably better than a payday loan.
Credit Card Cash Advances
Theaverage credit card cash advance interest rateis 24.24%.
Credit Cards
Putting what you need on a credit card is better than getting a cash advance.
Theres no extra fee and theaverage purchase interest rateis 6% lower.
Of course, you should still avoid borrowing at 18% interest as much as possible.
But even for a good purpose, you dont want to pay too much for the money you borrow.
Interest rates start as low as 5.32% and go as high as 35.97% on Prosper.
But loan origination fees (up to 5% upfront) increase the real cost.
P2P websites let you borrow money for just about any reason.
Lending Club also offerssmall business loansof up to $300,000 at rates as low as 5.9%.
One big advantage is all the interest goes right back to you, instead of a lender.
Thats assuming you pay back everything as planned, of course.Otherwise, youre just sabotaging your retirement.
They may have low interest rates, and deferred payment options.
And if you run into financial trouble, there areloan forgiveness optionsyou dont get with other types of debt.
Investment Property Loans
Financing rental propertieshas become more difficult.
Borrowing for investments that produce positive cash flow is one of the smartest ways to use debt.
Youll avoid loan fees and get a lower interest rate.
The IRS will tax the lender based on at least that rate.
Your Turn: Have you borrowed money in any of these ways?
Steve Gillman is the author of 101 Weird Ways to Make Money and creator of EveryWayToMakeMoney.com.
(Can you sense my millennial sarcasm there?)
You know which ones were talking about: rent, utilities, cell phone bill, insurance, groceries…
