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If you do need to borrow money, having a good credit score allows you to get better interest on loans in the U.S. I think the question you're really wondering

by whimsy 16y ago

If you do need to borrow money, having a good credit score allows you to get better interest on loans in the U.S. I think the question you're really wondering about, though, is why someone would borrow a significant amount of money given the state of the economy. I don't have good answers to that question.

brc 16y ago
If you have a relatively stable income, when the economy is at its lowest ebb is the best time to borrow money and invest. You'll have less competition for the money and less competition for the investments you buy. Finally, the stated policy of the Federal reserve is to inflate the currency. This damages savers and rewards borrowers. The smart thing to do right now is to borrow and invest in things that provide a real return over the pitifully low interest rate.
- Estragon 16y ago
  It's the best time to invest, sure. I don't know about borrowing to invest, though...
  - brc 16y ago
    Let me put it this way: If I have something that is: a) currently cheap b) likely to go down in value c) exchangeable for things of real, lasting value and I was prepared to let you borrow it from me, would you? Interest rates are low. Inflation is high (don't believe the govt statistics, look at your cost of living increases) Things of real value are currently low Your two risk factors are: 1) loss of ability to service debt 2) loss of value for the thing you exchange the debt for As long as the thing you buy covers the interest rate and/or you have reasonably assured income (nothing is certain) then the loss in value shouldn't matter, unless we're talking speculation in something. But if you can buy into a real company earning over it's cost of capital, or real estate that is providing income over it's expenses, then you should, by all rights, be home and hosed. Sure, it involves risk. But so does the zero case of sitting still and hoping things will get better.
    - Estragon 16y ago
      Actually, I'm sitting still expecting things will get worse. And when they do, cash is king and debt is an albatross.

by whimsy 16y ago

brc 16y ago

If you have a relatively stable income, when the economy is at its lowest ebb is the best time to borrow money and invest. You'll have less competition for the money and less competition for the investments you buy. Finally, the stated policy of the Federal reserve is to inflate the currency. This damages savers and rewards borrowers. The smart thing to do right now is to borrow and invest in things that provide a real return over the pitifully low interest rate.

Estragon 16y ago
It's the best time to invest, sure. I don't know about borrowing to invest, though...
- brc 16y ago
  Let me put it this way: If I have something that is: a) currently cheap b) likely to go down in value c) exchangeable for things of real, lasting value and I was prepared to let you borrow it from me, would you? Interest rates are low. Inflation is high (don't believe the govt statistics, look at your cost of living increases) Things of real value are currently low Your two risk factors are: 1) loss of ability to service debt 2) loss of value for the thing you exchange the debt for As long as the thing you buy covers the interest rate and/or you have reasonably assured income (nothing is certain) then the loss in value shouldn't matter, unless we're talking speculation in something. But if you can buy into a real company earning over it's cost of capital, or real estate that is providing income over it's expenses, then you should, by all rights, be home and hosed. Sure, it involves risk. But so does the zero case of sitting still and hoping things will get better.
  - Estragon 16y ago
    Actually, I'm sitting still expecting things will get worse. And when they do, cash is king and debt is an albatross.