4 Borrowing Rules Rich People Follow but Others Often Don’t

A well-dressed woman shakes hands with a well-dressed man.

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Can you benefit from following these principles too?

Important point

  • Wealthy people borrow money just like people with low incomes do, but they borrow in different ways by using debt as a tool to build wealth.
  • They also borrow for a variety of reasons, including getting credit card rewards that end up paying back more than they pay.

Taking out a loan may seem like something you do when you don’t have enough, but that’s not true. Many rich people are in debt; they just do it differently than their less affluent counterparts.

Of course, not all wealthy people have the same financial habits. But here are four loan rules that wealthy people follow that others often don’t.

The rich are not afraid to borrow. But they usually don’t borrow money to live beyond their means or because they haven’t been able to save for emergencies or plan to pay for expenses.

The wealthy, on the other hand, tend to use debt as a tool to help them build more wealth. For example, wealthy people may borrow money to acquire a business if they think they can improve their profits. They may also borrow to finance a startup, or use margin in their brokerage account to invest in more assets that will help them build wealth.

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2. Make your credit card pay you instead of you paying them

Credit cards are often used by wealthy people. But instead of paying interest to their card issuers, they collect rewards by paying off all their purchases and then paying them off in full to stay out of debt.

By collecting rewards and not paying interest on their credit cards, the rich get richer because of their relationship with the card company instead of getting poorer. Many wealthy people even sign up for cards with annual fees, but they do so to take advantage of the valuable benefits these cards offer, such as concierge services, flight or hotel upgrades, and more. .

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3. Don’t borrow against a mortgage

In general, the wealthy know that it doesn’t make sense to borrow against anything that will go down in value over time instead of up.

When you borrow for things like cars, consumer goods, groceries or vacations, those purchases become more expensive and cost you money. Unless whatever you borrow is going to increase your wealth over time, it’s not worth paying interest to finance it.

4. Make the lender work for your business

Finally, the wealthy don’t just accept any loan offered to them on whatever terms the lender wants to give them. They often make borrowers work for their businesses.

This can involve doing something as simple as shopping around for quotes before deciding which bank or credit union to borrow from. Simply comparing offers allows you to go with the company that gives you the best deal — rather than going with a random financial institution.

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The wealthy sometimes take this step even further. They may ask for a discount on the cost or other special loan benefits, especially if they have a relationship with the lender and can take advantage of it to get a better loan.

The good news is that you can follow all these rules even if you are not rich yet. And doing so can help you become rich over time.

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