We have all heard the horrific statistics that prove our country is in debt. Average credit card debt for indebted households is now $ 16,048, and average student loan debt topped $ 37,000 last year. The average loan for a new car is over $ 30,000 and lasts almost 69 months, and Americans owe an average of $ 196,014 on their mortgages according to Experian.

We finance our cell phones and furniture and, using credit cards, we also bill our clothing and fast food purchases.

With these hard truths in mind, it’s no wonder that nearly half of Americans can’t cover a $ 400 emergency – or that more than half of families have less than $ 1,000 in savings this year.

When you constantly borrow, you end up with scarce cash for daily living expenses, savings, and emergencies that arise. Because it eats away at all of your disposable income, debt can absolutely be the devil that stands between you and the life you really want.

When the debt is in your favor

But, what if the debt is not always shame? What if the way we use debt is the culprit of our money problems instead of the debt itself?

Recent research and commentary from financial experts seem to underscore this idea. Personal loans are a form of debt, but when used in a financially responsible manner, they can help and potentially save you money compared to other financial tools. For example, a new study by Discover personal loans showed that 68% of those who took out a personal loan said their loan helped them reach their financial goals. Another 70% of respondents said their personal loan made them financially responsible.

While some respondents borrowed to cover an emergency expense, the majority used the funds for medical bills, debt consolidation, or to start their own small business.

Financial planners also seem to agree that, despite the many horror stories about debt, debt used wisely can be beneficial in more ways than one. If you’re looking for times when debt isn’t the devil, here are a few examples they came up with:

# 1: You want to buy a house.

If you want to buy a home, you have two basic strategies to follow. You can slowly save hundreds of thousands of dollars while spending your money on rent, or you can take out a mortgage and borrow the money you need to buy the home you want.

This decision is usually obvious, says Kansas City financial adviser Clint Haynes.

Not only is mortgage debt “good debt” because it is secured by real estate, but today’s low interest rates have made borrowing costs particularly low. Currently, you can get a 30-year fixed loan for an APR of around 4%.

But, our low interest rate environment isn’t just about saving money; it can also help you grow more wealth. By borrowing money for a house at a low interest rate, you may have more money to invest. Over time, you will hopefully earn more by investing than the interest rate you pay on your home loan.

# 2: You need money to start a business.

Starting your own business might be the American dream, but you usually need money to get started. If you don’t have access to the kind of money you need, debt may be the only way to bring your idea to life.

Financial planner Matt Adams of Money Methods in Amarillo, Texas, says he’s seen several clients use debt to pursue their entrepreneurial dreams.

“In their situations, it paid off a lot,” he says.

Strategic Financial Group financial planner Christopher Clepp says he has witnessed a number of people resorting to debt to get into real estate specifically.

“If you want to be a homeowner, borrowing money to buy a multi-unit building, especially an owner-occupied building, can be a great way for you to take advantage of the low interest rates available on the market. today’s market, ”he said. said.

Income from other units may offset part of your mortgage costs and you will build equity in the building. “You also get the mortgage interest deduction,” says Clepp. “Rents tend to go up over time as well, and if you set a low rate on a 30-year fixed loan, your cash flow will improve over time. “

If you are using debt to start any type of business, Adams suggests taking steps to minimize risk as much as possible.

“Seek advice from your finance, tax and legal professionals to develop a detailed business plan before borrowing,” he notes.

It can be a good idea to go into debt if you have a solid business plan, but you shouldn’t go into debt if you don’t know what you’re doing.

# 3: You need a new car but want to save money.

Let’s say you’ve done everything right so far. You have largely avoided your debt, and you have saved several months of spending in an emergency fund. You have a good job, you are maximizing your 401 (k) and you recently opened a Roth IRA.

But all of a sudden your car breaks down disorderly and beyond repair. You are ready for a new vehicle for the first time in your life, but you are not too keen to withdraw $ 20,000 to $ 30,000 from your savings to pay in cash. After all, you want to save that money for emergencies and other purposes.

This is certainly a situation where a car loan can make sense, says financial advisor Anthony Montenegro of Blackmont Advisors.

“If you are looking for a vehicle, want to conserve cash, and want to save money on interest payments, a zero percent APR loan to buy a car is one of the best ways to boost your solvency, ”he says. .

Heck, even a low interest car loan can make more sense than putting tens of thousands of dollars in your savings all at once. According to Montenegro, the key to using a car loan to your advantage is making sure your payment is affordable and you don’t buy more car than you need.

# 4: You want to renovate your home to avoid a big move.

While your starting home might have been perfect when you bought it, a growing family can make any home feel small. Or, maybe your home is perfectly fine in terms of size, but you’re ready for a new kitchen or the upgraded bathrooms you’ve always wanted.

Moving can be very expensive, even if you don’t buy a more expensive house. Selling your current property will likely incur a 6-7% real estate agent fee, on top of any closing costs and any repairs you may need to do. Not only that, but you will have to travel or pay nose to get professional help.

In that case, borrowing money to renovate the home you already own can save you a lot of money, says Andrew McFadden, financial advisor for physicians. This is especially true if you have a lot of home equity to borrow against.

“Rates on home equity margins are typically only half to 1% higher than going mortgage rates, and in this interest rate environment, that’s a pretty good deal,” says McFadden.

Plus, when you think about the costs of selling your current home combined with the costs of closing your new home (between $ 2,000 and $ 5,000 on average), you could easily pay $ 20,000 or more just to change ownership. .

“Think about what you could do with that $ 20,000 on a home equity line to make some major improvements to your current home,” he says. “It is definitely worth considering. Especially if the improvements are practical, your home should increase in value for what you put in it, maybe more.

# 5: You want to go to college.

Everyone always protests against the student loan debt horrors, but at least part of the outrage is wrong. Sure, college costs can get out of hand, but earning that college degree can absolutely be worth it. For example, a recent report from the Economic Policy Institute showed that college graduates earned 56% more than high school graduates in 2015.

Of course, your ROI depends a lot on the degree you pursue. If you want to use student loans to get your money started, don’t borrow $ 100,000 to get a liberal arts or basket-weaving degree. And instead of choosing your school based on “what you want,” make sure your choice of university is a practical decision. For example, attend public school at a reduced price. Or, go to community college to save even more – at least for the first two years.

Either way, student loans can help you earn more if you go about it the right way.

“Borrowing money at low interest rates to fund college expenses can make a lot of sense,” says financial planner Ryan Cravitz of Milestone Wealth Management & Insurance Solutions. “It’s an investment in your future.

If debt isn’t the devil, what is it?

The worst aspect of debt we should all strive to avoid is the interest we pay, says California financial planner Steven Rocha of Define Financial.

“Debt isn’t necessarily the devil, but interest on your debt is,” he says. “You want the power of compound interest to work for you, not against you, which is why it is recommended that you avoid taking on debt. “

If you are going to go into debt, you should also make an effort to borrow only what you need and what you can afford to pay off. If you constantly overborrow, it’s easy to fall into a debt spiral that is hard to break free from.

Debt doesn’t have to be bad, and it can even work in your favor if you use debt responsibly and with a plan. But if you give him too much power over your life, be careful.

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