Leveraging Debt

A case against debt;

Debt is something many people regard as useful, especially with a low interest rate.

I'm here to convince you otherwise, debt is something I considered a tool for many years. I thought "I'll make minimum payments on my student loans and invest the difference". This is flawed and inmature logic. The problem is that although you may profit a few points, these small gains aren't worth the risk of the debt you're leveraging. Take for example the bank you are lending from is purchased, and the new bank demans full payment today. Can you afford to pay it off? Especially if you leverage money in every aspect of your life?

It's harder to make an analytical argument against debt, but I'll try. Although math favors the lender in many scenarios, risk is a factor that is nearly impossible to calculate for. But it's possible. The "beta" of a scenario is the risk factor which many people leave out of their calculations which may change a situation from 2% profit to 1% loss due to risk.

Thirdly and finally I'd like to propose the idea that banks lending money for low interest rates is a hint, they wouldn't do it if they lost money.

Regards,
- Vrgrl