Is there a way to responsibly take on some debt and profit from it?

[Duiker]

I've been debt free for a long time and saving regularly, normally I wouldnt touch loans because I dont need them. But Ive been thinking lately, If I make a regular income and have the habit and financial security to always pay off any future debts I take on, is there a way I can benefit in some way from this?

This would be alongside saving and investing, of course.

 

[MrTroll]

Yes, it's called being a bank.

 

[Duiker]

Well shit. I figured it was a dumb question.

 

[Agamemnon Busmalis]

Of course, if the rate of return on the investment is greater than the interest cost of the debt used to fund it, it's definitely profitable to do so. The hard part is knowing whether or not you'll actually get those returns but that's where due diligence comes into play.

A lot of companies took on PPP loans for the 1% interest rate and never even bothered to apply for forgiveness (or didn't qualify).

 

[Phalanges Mycologist]

Debt purchase - you buy them in bulk and then forgive the legitimate stuff like debts accrued by families who've hit hard times, and then go after business debts, you'd be shocked how many large business owe money that they refuse to pay go after those debts till you get a judgement add costs and if they don't pay sick enforcement on them it's weirdly profitable.

 

[Agamemnon Busmalis]

Debt purchase - you buy them in bulk and then forgive the legitimate stuff like debts accrued by families who've hit hard times, and then go after business debts, you'd be shocked how many large business owe money that they refuse to pay go after those debts till you get a judgement add costs and if they don't pay sick enforcement on them it's weirdly profitable.

It'd probably be better to just not collect on it at all than forgive it, that could lead to those people having to pay a not-insignificant amount of taxes if it is considered income. A lot of forgiven debt is taxable in most circumstances, at least in the US.

 

[CowPox]

Taking on debt should be approached cautiously, and it's important to consider the purpose and potential returns. Responsible debt could involve investing in education, starting a business, or real estate, where there's potential for positive returns. However, thorough research and a clear repayment plan are essential to mitigate risks. Consultation with financial professionals is advisable before making significant financial decisions etc.

 

[Phalanges Mycologist]

It'd probably be better to just not collect on it at all than forgive it, that could lead to those people having to pay a not-insignificant amount of taxes if it is considered income. A lot of forgiven debt is taxable in most circumstances, at least in the US.

That I didn't know, here in the UK you can discharge a debt if it's gone to collections and it's just voided, it's considered a charitable act IRC.

 

[Agamemnon Busmalis]

That I didn't know, where in the UK you can discharge a debt if it's gone to collections and it's just voided, it's considered a charitable act IRC.

That makes a lot more sense to me. I don't know how someone can afford to pay taxes on forgiveness of debt when the reason they couldn't repay the debt to begin with is because they didn't have the money to do so.

My guess is it's because it's an archaic piece of the code from back in the 1930s and 1940s when most people didn't have a lot of debt and the primary beneficiaries of debt forgiveness were wealthier individuals impacted by the Depression.

 

[Phalanges Mycologist]

That makes a lot more sense to me. I don't know how someone can afford to pay taxes on forgiveness of debt when the reason they couldn't repay the debt to begin with is because they didn't have the money to do so.

My guess is it's because it's an archaic piece of the code from back in the 1930s and 1940s when most people didn't have a lot of debt and the primary beneficiaries of debt forgiveness were wealthier individuals impacted by the Depression.

Yea I will ask my friend about it as he will know more, he had a family member who took out a lot of debt they had a brain tumour and it effected there behaviour and was doing weird shit like taking out a loan for £5k and then taking it out in £1 coins and giving it to random people by the handful, bought a few used cars on credit and then parked them outside places he travelled to because he couldn't find his car when he walked there - they got treatment and had to help them sort it out and it got voided, I think the worst one was the Co-Op bank an they asked for something like 10p for every £1 they borrowed and that eventually got forgive or voided.

 

[Vecr]

You have to be very careful, because whatever scheme you come up with very likely has failure modes you don't know about. In addition, let's say you had investments, 1, 2, 3, 4, and 5, and your plan could survive the total failure of any one and still be able to pay the loan back. However, failures of that type are often correlated, so it's reasonably likely over a long enough time horizon that many or all could fail before you could recover, essentially leading to your ruin. In addition, certain financial instruments can have either unlimited or very large downsides, possibly causing you to be wiped out by a single bad investment out of hundreds of good ones, even if it (the upside at least) is very small.

 

[Waifu Denier]

The problem is that you as an individual will likely lack any options for debt which have an interest rate that makes it feasible to borrow for any reason other than a desperate immediate need for money. Banks and businesses in general borrow all the time (even companies with billions in cash like Apple) because they do the simple calculus of the expected return of their investment far exceeds the interest on the money they borrowed to finance it. You on the other hand are not getting anywhere near the prime rate. The closest you will get is probable a mortgage which is I suppose an investment that usually pays out (and lets you live in a house).

 

[Pedophobe]

Nyet comrade is simply not possible. Get back to work and fill quota or I will not stamp ration card.

 

[Betonhaus]

Ask on wallstreetbets or start your own company.

But realistically, if you're able to save alongside covering you're regular expenses, the best thing you could do is invest in yourself instead of taking on more debt. Make sure your car and stuff is maintained and in good condition, maybe take night courses to expand your education for better jobs, maybe set up a side hustle of something you do just for the enjoyment, maybe gift me 20k so I can rebuild my life, maybe get a nice car or RV or gaming computer or consoles, maybe just continue to build a rainy day fund for if something really bad happens, maybe take a risk and try being your own boss... The sky's the limit, and you don't necessarily have to take in debt to do so.

 

[CAPTAIN HAPPY]

 

[WTBOnlineFather]

Just debtmaxx bro

(inb4 spergs from the Sam Hyde thread come here to screech about the obvious, that you shouldn't take this seriously)

 

[DiscoRodeo]

In theory, inflation can negate debt.

If you take out debt and inflation gets out of hand like in Lebanon, suddenly your 10,000 lebanese pound debt seems pretty meaningless when they're just printing out money and that essentially equates nothing.

But this sort of thing doesn't really happen in the West (unless youre in Argentina) and that kind of government debt defaulting or hyperinflation is bound to have numerous other issues.

 

[Pendulous Dong]

As @Agamemnon Busmalis said, if you would make more money by not paying off the debt then don't pay it off.

Take student loans for example. Let's assume that you got unlucky and took out $10,000 of student loans when the interest rates on those peaked in 2018 at 5.05%. In the intervening years you've saved up $10,000 in cash. Now that repayments have started up again, you have two options:

1. Pay off the balance as quickly as possible so you pay as little interest as possible.
2. Wait it out and pay $106/mo for the next 10 years.

Emotionally, you're going to want to choose option 1. Get that monthly payment out of your life and stop paying interest. Over the course of 10 years, you'll end up paying $12,757 on that original loan.

However, financially it makes more sense to invest. If you take your $10k that you've saved up and stick it in something like SPY or a similarly safe, boring, low-yield ETF then after that same 10 years your $10,000 would be $30,000 ($23,000 if you adjust for average inflation).

The same thing applies to paying off any debts. If you can get a higher return from investing than the debt costs you, then invest. If you can't, then pay it off early.
Mortgage? Invest, unless you have an 11% interest rate or some insane shit like that, in which case refinance it.
Auto loan? Depends. Average auto loan across all credit scores right now is 6.6% for a new car and 11.4% for a used car. If you're closer to that 6.6% it's likely better to invest.
Credit card? Pay that shit off. Average interest rate on a new card is 24.6% a year, and the only way you're gonna beat that is by gambling on stocks and/or shitcoins.

 

[reptile baht spaniard rid]

I've been debt free for a long time and saving regularly, normally I wouldnt touch loans because I dont need them. But Ive been thinking lately, If I make a regular income and have the habit and financial security to always pay off any future debts I take on, is there a way I can benefit in some way from this?

Yes, it's called arbitrage. The problem is you're usually arbitraging risk without realizing it.

But, you could get one of those 0% balance transfers on a credit card for less than a same-length CD is paying, and may about a dollar after taxes, fees, etc.

Where you could leverage it, is by doing something you're going to do anyway, but do it a bit more. Like buy a bigger house or in a nicer area.

 

[Tumbo II]

Can you utilize debt to make money yes should you utilize debt to make money IMHO no if you're current savings pattern works for you I don't see any reason to try something new that may end up backfiring.