When Debt Makes Sense | Personal Finance & Lifestyle | Yakezie Forums

As some of you may know, I was debt free (including my former mortgage) and pretty proud of the fact.

I've been able to accumulate money this past year, in fact enough to buy a car outright.

But instead I took a car loan with a stated interest rate at 2.5%!  And you might think why?

I'm going to invest the money instead!  Hopefully I can find a stable dividend stock that has a yield that's higher than 2.5%, so now owning debt makes financial sense to me.

The key is that I don't have any other debt and I'm investing the amount that I own on the car in investments.  That fact that the interest paid to the bank versus the potential interest from dividends make sense to me (by a factor of about 2 to 1 if I do it right).

Has the low interest rates opportunities changed your plans with respect to debt?

krantcents said:

I did the same thing!  I took the loan because my interest rate was 1.99%  for 5 years, although I am repaying less than 4 years. 

Wow, very nice.  I'm not sure what my rate would have been if I took a 5 year loan.  Probably a bit less still, but I'm happy with the 2.5% rate.

And to think, I never thought I'd have consumption debt longer than a month's timeframe again!  It just shows that anything is possible depending on the current environment :)

What car did you buy?  I ended up buying Camry.  Now it's time to seriously look at buying rental property soon!

MoneyBeagle said:

That's not a bad strategy.  If your investment goes up as well, you get an even bigger bonus.

I think for many it's a psychological thing. To have the 'money I owe' number go from 0 to something greater, or to go higher if you do have existing debt, is something many just don't want to see, even if it makes financial 'sense'.  If this is too troublesome, then by all means sticking with the lower debt number is perfectly fine as well.  There is no one size fits all solution.

Yep, I totally agree on the "no one size fits all", and if someone is already in massive debt (or consumption debt), I wouldn't recommend this path… it just adds fuel to the fire.

This is just the first step for me though.  I actually hope to get a rental property this year, but I'm not going to rush it.  I'm still debt adverse so I'm in no hurry to get into debt…

Here's to a great new year for us all!