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Make Debt Work for You

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Debt does not have to be a negative thing, especially if it is used to increase your opportunities in the future. There are a number of loan types that allow you to profit from the money that you have borrowed, as long as you treat it like an investment. Making smart choices with your money allows you to take on debt, pay it off and then indefinitely profit from the risk that you have taken.

Mortgage

Perhaps the best way to profit from debt is through a mortgage. This is because the value of your home is likely to increase in the future, which increases your net worth.

It might take time to pay off your mortgage, since your loan will likely be for hundreds of thousands of dollars. You also have to worry about interest payments, as the longer it takes you to repay your loan, the more you will pay in interest. In the end, however, your house is likely to provide you with a nice retirement fund if you decide to sell it in the future, as long as you buy a solid property in a good location.

Student Loans

Another form of debt that can make you money is a student loan. While many students complain about how much money they owe once they have finished college, student loans ultimately make it possible for students to increase their earning potential exponentially.

If you cannot afford to pay for college on your own, a loan is perhaps your only hope of being able to cover the costs and thus be able to attend school, graduate and subsequently find a high-paying job. As a result, taking out a student loan in essence becomes your only chance of reaching your financial goals. While paying off this debt will hurt in the short term, it will be well worth it once you have your degree and are making great money.

Tax-Deductible Loans

Many people have learned that any debt which is used to grow assets is tax deductible. If you take out a loan to make an investment, you can write your interest payments off during tax season, which should save you money on your taxes.

One such loan type is a rental mortgage, which is a loan that you take to purchase a second property. As long as you rent this property out, you will save on taxes, while having someone else pay for this appreciating asset. If you pay the loan off slowly, you can keep these tax benefits for a longer period. Since your renters are paying off your mortgage, you do not have to worry about the cost.

Using Borrowed Money for Profit

In all of these situations, you are using someone else’s money to improve your financial situation. As long as you make your monthly payments, this debt will not hurt your credit at all. In fact, showing that you can make payments every month improves your standing in the eyes of potential creditors, since they see that you can effectively manage your debt. Be sure that you know the difference between good debt and bad debt, as high-interest credit cards will have the opposite effect on your financial situation.