Neither a borrower nor a lender be?

Most personal financial counselors suggest paying off debt and some even promote zero debt living, however, the world is full of business individuals who made fortunes by being highly leveraged. So what is the true answer? My general rule when it comes to debt is to borrow when you have the money and pay down debt when you don’t.

A person’s greatest asset, believe it or not, is their reputation. In the world of credit, your credit score is your reputation. Debt can be useful but it needs to be managed well. I currently have a car loan at less than 1% interest. This was not a promotional loan from a dealer, this is a loan from my bank. The 36 month loan was 1.39% originally but I received another 1/2% discount for setting up automatic payments bringing the rate down to .89%. At that rate, it makes much more sense to borrow and leave my principal in a mutual fund currently earning around 10%. 

Having manageable debt actually helps your credit score, which, in turn, invites some outstanding credit offers, such as zero interest credit card deals. I also recently transferred some other debt into a zero interest credit card (for 15 months) with zero in transfer fees. Why pay off a credit card when the interest rate is zero?

Therefore, if you have the money to pay cash consider a better arrangement using credit if the interest rate is lower than what you can achieve with another investment. If you do not have the cash to pay for an item, then perhaps you shouldn’t buy it anyway. Remember, use debt when you have the money and pay down debt when you don’t.