This really sounds like the ultimate oxymoron, but one of the best ways to get out of debt is to go a little bit further in. What’s that? First, to help this make more sense, let’s clarify – if you need to get out of bad debt, going into good debt will help you pay off those credit cards and make more money. It’s important to understand that there is a huge difference between good debt and bad debt. Going into good debt has some risks, but when managed correctly, you can end up making enough money to quit your job, pay off your bills and save for retirement.

Let’s take a look at one example of how going into good debt can get you out of bad debt. For this example, let’s say that we have a person who has $10,000 in credit card debt. They’re overextended with too many cards and paying way too much interest. It’s getting harder and harder to make those monthly minimum payments and it seems as though it will take decades to get out of this mess.

Instead of declaring bankruptcy and just giving up, let’s say that this person goes and gets a loan for $2000. Since their credit is still pretty much intact, this isn’t an issue. They take than $2000 and invest it into ten shares of a stock that sold for $200 a piece. Within the first month, the price of that stock triples. They now have $6000 and it’s only been one month. They take $2000 out of that amount to pay off the loan, and are left with $4000.

Over the next month, the stock once again goes up. That $4000 is now $8000. The person cashes out the stock, pays down their credit cards and is left with a manageable $2000 in debt. Why not pay it all off? The secret to great credit is leaving some debt that you continue to make payments on – this builds up your credit score. In two months, the person was able to go from $10000 in debt to paying off all but a small portion of it.

Compare that to getting a consolidation loan. In two months, the person would not have made a dent in what they owed. If the stock market isn’t your thing however, there are many other ways that you can use good debt as leverage to create multiple streams of income. Whether you deposit it in a high interest bank, buy a CD or purchase a rental property, a leveraged loan can help you get out of debt much faster than a consolidation loan.

The key is picking the right opportunities and managing your money. Once you’ve paid down your bad debt, keep using good debt to create more income streams. This is the secret that thousands of millionaires use every year to keep bringing in tons of cash and it will work the same for you.

Photo Credits: 1

Originally posted 2008-11-24 07:44:19. Republished by Blog Post Promoter

Related Posts

• Sunday Money Madness: Ghosts, Spirits, Haunts, and Souls Lots of holidays and celebrations this weekend. Halloween on the 3st. All Saints Day on the first of November. All Souls Day on the second. Dia de los Muertos covering the whole weekend for many, also known as the Day of the Dead which was yesterday specifically. Samhain for the......
• Debt Consolidation Credit cards are financial devices which their users end up digging themselves too deep with. Pay it later is too easy with a credit card. Too many users will buy stuff that is outside of their means and as such will get into trouble. Compound this with numerous cards, and......
• Calculating Your Net Worth Your own personal net worth is something that can serve as a truly useful tool in measuring the financial progress that you have made from one year to the next. What your net worth is, is essentially just a grand total of all of your assets, with liabilities subtracted. There......
• Restore Your Fico Score – Part One While obsessing over a FICO score is not a good idea, this is a number that will have a lot of bearing in your life. This number determines whether or not you will be able to get a house, a new credit card, or in many cases, whether or not......
• Running Out of Time? How to Catch Up Financially Before it is Too Late Whether you are pushing thirty and trying to get your first home or your retirement is staring you in the face, there are times when you may feel as though you’ve run out of time financially. We don’t always make the best decisions when it comes to saving money and......

Related Websites

• Why Debt Settlement and Loan Consolidation Don't Work. Debt settlement companies and consolidation loans look like a lifeline when you're staring a 5-figure debt load in the eye. But this is rarely the case. In fact, most people only end up prolonging their indebtedness and adding unnecessary fees and costs to the effort to find financial freedom. As......
• West Coast Fishermen are Embarking on a Brand New Wave in Fishing The groundfish fleet on the West Coast has been struggling to stay afloat as a result of major cutbacks that have been designed to reverse problems with overfishing as well as to protect the sea floor from any damage being caused by trawling gear. The fleet is now embarking on......
• Borrow Money on Prosper -- Case for Unsecured Debt via Personal Loans Prosper Marketplace, Inc. is a peer-to-peer (p2p) lending marketplace that facilitates 3 year fully amortized loans between lenders and a borrower.  A borrower wants to borrow money and lenders want to earn better than average returns.  The most typical reasons for loans on Prosper are credit card debt consolidation, small business......
• UpDown: Practice Investing, Beat The Market And Earn Money Raise you're hand if you've ever bought a stock and lost money on it.  My hand is raised too.  I've done it a few times actually.  I've made money too.  Despite the fact that picking stocks and trying to beat the market is a fruitless effort for most, we can't......
• Pay down debt or invest There’s a debate you read often on personal finance blogs: if you have a large sum of money, should you use it to pay down debt or invest? The answer is usually dependent on the person’s risk tolerance, but I think it also depends on the nature of the......

Online Stores

• Credit, Charge Cards Trading Cards Collectibles

If you liked this article, vote for it on del.icio.us and stumbleupon.


Categories:

Bankruptcy, Debt, Personal Finance, Stocks, credit score

Tags:

bad debt, cashes, consolidation loan, credit card debt, credit cards, credit score, decades, declaring bankruptcy, enough money, little bit, minimum payments, money to quit your job, oxymoron, retirement, small portion, stock market, ways to get out of debt