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by Christy Bieber | Published on Aug. 20, 2022
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If you're hesitating to borrow, you may want to read about why Graham Stephan is in favor of debt.
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Being in debt is often considered a bad thing, especially by some finance experts like Dave Ramsey.
But real estate investor and finance personality Graham Stephan has a really different attitude. In fact, Stephan has indicated that while he's often criticized for borrowing a lot, he's happy to be in debt to the tune of $4 million.
Stephan has gone so far as to describe his debt as "the key to my wealth," and said, "I still wouldn’t pay off any of my loans early." So why does Stephan think borrowing is good? Here are a few key reasons.
Stephan likes debt because of the fact that some types of borrowing can actually make you money rather than cost you money.
He explains there's two types of debt and that one type, "debt taken for acquiring assets," is an investment that can make you richer in the end. And he said that as long as you can tell the difference between debt that makes you money and debt that costs you money, there's nothing wrong with borrowing if it helps you acquire assets that will produce returns for you.
Stephan also explains that if you can profit off the margins, debt is a good thing. As a simple example, he explains that if you could get a $100,000 loan at 0% interest, you'd always want to take it because you could invest in any asset and repay the loan while keeping the returns your money made.
He explains that while a 0% rate isn't available to most people, you can still profit off the margins when you get a reasonable loan rate, such as being able to borrow at 4% like you can with a mortgage if you are buying real estate. "If you have some experience with real estate, you could invest in a property that would appreciate at 7% over time, and the 3% difference is your profit," he said.
So if you can borrow at a low rate, invest the money, and make enough from your investment to pay your interest and keep some profits, Stephan thinks you should do it — as long as you're aware of any potential risks and work to mitigate them.
Finally, Stephan likes debt because debt makes inflation work for him. "You get to pay off the expensive debt of the past with the cheap money of the present," he said.
He explained that each $1 million in debt he has taken on is reduced by $75,000 when the inflation rate is 7.5% because the money he's using to pay on his loans is worth so much less in real terms.
"The rates at which I locked in my debt are much lower than what they would be due to inflation, so though my money has less purchasing power considering the current prices, my past debt is easier to pay off," he notes.
He advises against repaying loans when inflation is high as it is now, and he's correct that it doesn't make sense to devote extra money to paying down loans when your money is losing value every day.
Ultimately, Stephan is right about all three of these points. If you can borrow responsibly to acquire assets that grow your net worth, there's no reason not to.

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Christy Bieber is a personal finance and legal writer with more than a decade of experience. Her work has been featured on major outlets including MSN Money, CNBC, and USA Today.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
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