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My Personal Beliefs on Debt: Part 2


If you’ve been reading my blog regularly, you know that debt scares me a little. But, what debt do I consider to be ok, and when do I think it’s absolute idiocy to take out a loan? And, more importantly, why do I believe what I believe when it comes to taking on debt?

In Part 1 of this two part series, I expressed that house loans were ok, but they should be paid off as soon as possible, and I also stated that car loans were idiotic. Check out that post and leave a comment if you disagree (or you can just leave a comment saying, “Right on! Preach it!” if you agree with my thoughts). 😉

College Loans

College is quite import and there seems to be a larger percentage of the population attending a higher level of education each year. But, how are many of these young adults making it through this very expensive endeavor? College loans of course!

After graduation, the loan comes due and the debt repayment begins. Many students are forced into a job they don’t want because their loan needs to be repaid. Other students never find a job and end up declaring bankruptcy (1/5 of all bankruptcies are recent college grads). Occasionally, a student gets the job they desire, but they are still limited with their future plans because of the debt that needs to be repaid.

If you had the option to graduate college without an ounce of debt, you’d do it wouldn’t you? I’d snatch up that deal in a heartbeat.

Because of the reasons above, I am quite strongly against college debt! It is possible to save up for college and pay cash for each semester as it comes. It just takes a little bit of extra work! Once you graduate without any debt whatsoever, you’ll be happy that you put in all of those extra hours during your school years.

Business Loans

When employees get fed up with their bosses or just feel that it’s time they work for themselves, it’s quite likely that they’ll take out a loan in order to begin their business venture.

In addition to this, already-existing businesses may be looking to expand and need a little help from the bank in order to do so. This scenario happens quite often too.

What are the risks?

When I think about loans, I often think about the risk that comes along with that fresh debt. If I were to go out and start my own business, chances are that I will not make it. In fact, I have an 80% chance of closing my doors within the first 5 years.  

What if I took out a loan for $100,000? After 5 years, I would have no income and a $90,000+ loan to repay. That doesn’t sound like a good scenario to me. This is why I am not a big fan of business debt.

A better solution

When I decided to start blogging for an income, it cost me only $44 for the first year. I obviously didn’t need to take out a loan, so there was very little risk. Plus, after making over $7,000 in that first year, I have developed a plan to ramp those earnings up to $40,000 in the second year.

There was no loan, which made my business very low-risk, and now there appears to be no limit to what I can earn! It’s a way better deal than borrowing money for something that will most likely fail.

Have you ever taken out a loan for college or for your own business and wish you hadn’t? Or, maybe you’re glad you did. Let me know your thoughts on my beliefs!



My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. I do have some educational loans and some loans that I used for business. I would have to agree with what you have written.

    • You’re my real-life example. If you had to go back and do it all over again, would you make more of an effort to start your business with cash?

  2. As far as the student loans: right on! Preach it! I am a young professional with a truckload of student loan debt. The payments are more than twice my mortgage payment and the debt itself is almost twice my home loan! I wish I had taken more control of my finances when I was younger instead of blindly taking these loans.

    • Wow, it sounds like your student loans are tough to manage! If you wouldn’t mind, I would love to get a short personal story from you for my new book on college debt. It would really help drive home my “no student loan” stance.

  3. I had to take out a small loan for school and I am glad I did. Without it school wouldn’t have been possible and I wouldn’t have the job I have now. I paid it off quick so I wasn’t saddled with payments for a long time. For me it was a key to success.

    • Thanks for the comment Miss T. I’m glad that you don’t regret taking out those loans and that everything worked out for you. Do you think you could have found another income source though, to go to school without the need for a loan?

  4. I have several mortgages with my rentals. I think they are fine as long as I can fill the units. Business loan are risky, but necessary. If small business owners can’t get loans, we wouldn’t have Apple and many other companies.

    • Does that large debt ever bother you? Will you retire will a large amount of debt as well? I’m not sure my stomach could handle that….

      • The large debt doesn’t bother me that much because those rentals are not underwater. I can always sell them if I need to get out of renting.
        I think the debt are ok as long as we have positive cash flow from those investments.

        • That is true. As long as you have some equity in your properties, you should be ok. If I were you though, I would be doing my best to pay some extra toward those mortgages each month! I know you’re smart though, and I love reading about your rental experiences.

  5. The internet has enabled a lot more people start businesses. The entry costs are so low, there is no reason not to try it.

    • Exactly! That was my mindset a little over a year ago, and now I’m earning a nice side income from that risk-free decision! 🙂

  6. I think the mentality is more important than the loans themselves. If someone does not have parents who can help them with tuition and living expenses and he/she has saved up before entering college, continued to work throughout college but still can’t pay all the bills and tuition, then student loans are a must. If someone chooses not to work and is completely reliant on student loans to get through college for tuition and living expenses, in that case student loan is evil.

    As for business loan, it depends on the business. I know someone who (with some help from family) is in the process of opening her own optometry practice. She is taking out a good size business loan but the risk is tolerable for her. I think I would be too if I were in her shoes considering optometry is pretty solid for success.

    • Thanks for the comments SRL! Do you ever think that someone should take a semester off if they can’t afford to pay for college with cash? I do, it will save them tons of dollars in the future, and they’ll appreciate college that much more.

  7. My parents gave me a choice. Go to the local university for free (meaning they would pay) or out of state with loans. I chose to go to the local university (the department I graduated from is highly ranked). I went out of state for graduate school which was fully paid for (with a stipend) from the university. On the flip side, my husband took out student loans for both undergraduate and graduate school (for the same schools I went too). We both have great engineering degrees and are able to pay off his student loan quickly. He doesn’t regret taking out out the loans and I don’t regret choosing the local university for my undergrad education.

    • So either way, it worked out! I know I would advise others to go your route if given the choice, especially if they knew they were going to graduate school. Thanks for commenting!

  8. I have business loans for my real estate portfolio. The reason I do this is because I can take advantage of leverage and control a very expensive and safe asset. I consider my transactions safe because I buy rental properties for income potential only I do not factor in appreciation. If I was to perform the deals with all cash I would actually take on more risk than acquiring a loan and have huge opportunity cost to factor in. Aside from real estate I do not use loans for anything.

    • I understand the concept (since my degree is in Finance), but I just wouldn’t feel comfortable taking on so much debt. Is there a point where you’ll consolidate your portfolio and pay off all of your debts?

      • Derek ofcourse there is always a plan. In my specific example to control 35k I have an outlay of 140 dollars per month (interest only). In this particular market 1 house brings in 9x the debt outlay. In 3 years I could acquire 10-15 homes. So after the 3rd year I begin to pay off all the mortgages. Fin

        • Sounds like you’ve got a plan at least! I commend you for that. One all of those mortgages are paid off, you’ll sure be sitting pretty!

  9. The more I think about it and see real life examples the less I like student loans. I see person after person carrying tens of thousands of dollars of student loan debt and earning what they could have earned without going into debt.

    • Same here Ashley! I’ve heard so many horror stories about young kids trying to pay back their student loans, and it often leads them into a job they don’t want (or that they’re overqualified for) just so they can survive without going bankrupt! I definitely push a no-debt college experience.

  10. I’m so impressed… and so confused. How on earth do you do so well? I’d love to learn more about your successes. Congrats.

    • What do you mean Doctor Stock? If you have more detailed questions, I’d be happy to answer them. Just contact me via the “Contact” tab above the header.

  11. Also for real estate debt I also do not recommend using leverage if you cannot pay the mortgages without rent coming in. This is my safety net just in case the strange happens.

    • Great plan YFS. I’ve always felt the same way as well. That’s why my plan is to buy one house at a time. If there aren’t any renters, I’ll be able to pay the mortgage with my regular job income.

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