Good Debt creates wealth, for both people and businesses. If the interest rates are low, you can take out a loan to buy a house or a car instead of cashing out of equities that gives you much better returns than paying off a cheap loan. Same goes for companies especially small businesses. They can use this cheap money to expand their business instead of taking money out of the cash reserves of the company.
I’ve made a fortune for 30 years by using debt to buy houses and cars on debt (low interest rates) when I could have easily pay cash for them. For example, say I bought a house for $1M and at that time, I could buy it using a 3% loan for 30 years or sell equities that are making me anywhere from 10% to 40%, which makes more sense? Some will say you don’t always make that much return on your money, and this is true, but when the market tanks, thats the worst time to sell equities to buy a house or a car.
I think Ramsey and Orman are dead wrong in regards to debt and home debt. They think by paying off a house, you will then have money 7-10 years down the road to invest. That’s wrong! You will lose 7-10 years of compounded interest gains, and losing 10 years of investing, you have to quadruple your monthly amount to invest and still not get you to where you would have been investing throughout this time. In my experience, my last few homes in the early 2000’s, I was making enough money in dividends alone in a year to pay for 3-4 mortgages. That’s free money!
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