Borrowing Money to Acquire Assets: Good Debt
There are basically 2 types of debt. One is a good debt and the other is a bad debt. Any Asset producing debt is a good debt and any liability producing debt is a bad debt. Rich people always take a good debt to become richer while middle class people take a bad debt and struggle financially for the rest of their lives.
The Examples of Good Debt -
- Business Loan
- Educational Loans
- Real Estate Mortgage Loans
- Any other debt that will produce Asset at the end
The Examples of Bad Debt -
- Credit Cards (Worst)
- Car Loans
- Personal Loans
- Shopping EMIs
- Any other debt which does not produce any asset at the end
People who borrow money to acquire assets become rich and wealthy over the time. This is because when they repay all of their debt, they become the owner of the Asset which generates income for them even if they don’t work.
While people who borrow money to acquire liabilities can never become rich. Because liabilities such as car, mobiles, or any other thing depreciate in its price over the time and the owner of such liabilities get poorer.
So to become rich, always borrow money to acquire assets only and stay away from liabilities…!!!