Yeah, back when I was a regular on a board with a large population of people who were transferring their debts around round-robin style, a frequent occurence was a guy running out of creditors to round-robin it through… eventually all the inquiries and $ utilization these guys had caught up with them, even though they weren’t behind on any payments.
The 0% offers just kind of dried up, and they wound up paying interest on this “debt I’ll just BT forever”.
Read “Rich dad, poor dad” – where the author discusses good vs. bad debt.
An example of good debt – you borrow money to buy an apartment building that you rent out. The amt of income from the unit is larger than your expenses.
In this case, it’s better to be in debt and have a profitable asset than to NOT be in debt and not own the asset in the first place.
That’s good debt. Which he claims is better than no debt at all, which leads to no passive income.
Bad debt is credit card debt. Car payments. He even thinks of houses as liabilities, not assets. Read the book for a better explanation. Very cool concepts in there.
Thinking in this simplistic manner(not filmyak specifically, but people in general) is rather dangerous without also understanding the notion of risk and leverage.
Risk, being that you can’t predict the future, and there is no such thing as a single asset that appreciates in real value indefinitely. Is that apartment building going to produce that amount of rent indefinitely? Is the roof going to fall in tomorow? Is the factory that employs most of the people who live in it going to shut down next week? How would you know?
Leverage, meaning that if you take on lots of “good debt”, and it suddenly all turns into “bad debt” in the form of a real estate/dotcom/tulip collapse, you are somewhat more fucked than if you had no debt to begin with. See “risk”.
In developed nations with reliable systems for tracking personaly credit, one is shielded to a certain extent from the risks of leverage, in the sense that the idiots who loaned you the money can’t legally break your legs if you don’t pay them back.
Do a search for Robert Kiyosaki. I have, in the past, contended that he’s not a valid source for financial guidance. He is, most certainly, a liar… and a best-selling author.
Also, to be honest, investing in rental property with borrowed money is quite risky. Author Dave Ramsey used to flip houses all the time, but he now advises only getting into that business on an equity basis… the interest on an apartment complex loan can easily eat your long-term profits when all factors are considered.