The best way to borrow money

The best way to borrow money

All debt is not created equally. In order to maximize life and minimize stress, you must compartmentalize good debt from bad debt.

  1. Low-cost debt should be used as a tool.
  2. High-cost debt should be avoided and eliminated.
  3. The line between low-cost and high-cost is approximately 5%.
    • Keep debt with an interest rate under 5%.
    • Avoid and pay off debt with an interest rate over 5%.

 

See related article:
Why you should not pay down your mortgage debt

 

How to borrow for less than 5%

The best way: mortgage

If you own a home, the majority, if not all, of your borrowing should be in a mortgage.

This is not to say that owning is superior. There are many times that renting makes much more sense. When you get my detailed plan I will guide you on things to consider.

 

Other ways to borrow for less than 5%:

  • Student loans
  • Car loans / car leases
  • Home equity line of credit

Any of these at or around 5% are a great ways to borrow money. If they are above 5%, take it off the list.

 

Wealth management loan

For those who qualify, all of your borrowing, outside of a mortgage, should be through a wealth management loan.

Rates are generally between 2% and 3%, tax deductible. I provide specific guidance and detail for those who are eligible in my detailed plan.

 

Other forms of borrowing

Any borrowing at a rate over 5% should be avoided. This includes most every personal loan, credit cards, and other forms of lending.

Note on credit cards:
You should never carry debt on a credit card. However, you should use one each month for the benefits / to transact.

 

 


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