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Say you can get debt at 3% interest. The same money could get 4-7% yearly average return in safe investments over a 7-15 year time frame. Why wouldn't you aqui
by cobookman 7y ago
Say you can get debt at 3% interest. The same money could get 4-7% yearly average return in safe investments over a 7-15 year time frame.
Why wouldn't you aquire debt?
This is the same reason rich people get a mortgage even if you could afford to buy the house outright.
Best part is that debt is defaultable.
- User23 7y agoAnyone with collateral can go into debt at 3%(ish) interest. I've never heard of anyone getting a sizable loan for longer than overnight at that rate without collateral. If there is a counterexample please share it. And if a person defaults on a collateralized debt, well, they lose, and usually badly. Margin calls are one of the nastier examples, but foreclosures also come to mind. Even a safe investment like US Treasury bonds can trigger a margin call if, for example, interest rates rise and reduce the market value of the bond enough to fall below margin requirements.
- tomatocracy 7y agoMost vanilla corporate bonds are unsecured and offer nothing more than a promise not to give anyone else security over the corporate assets and an unsecured debt claim.