6 Ways Rich People Use Debt to Get Richer

Two people can take the exact same loan, at the exact same rate, on the exact same day. One ends up buried, the other ends up richer. The difference is one number.

Debt is just rented money

A loan is renting money. Interest is the rent. The only question that matters: does what you do with that money earn more than the rent costs? That gap is called the spread — and your return on your own cash is the spread multiplied by how many dollars you control for every dollar of your own.

The six ways

• Trade credit. Control inventory with none of your own money using supplier terms.
• Real estate. Buy below value, force it up, refinance, and recycle your entire down payment.
• Buy & borrow. Borrow against assets instead of selling them.
• The dark side. Margin calls and short selling — leverage multiplies in both directions.
• 0% arbitrage. Move high-interest debt onto 0% — a guaranteed return almost no investment matches.
• Your cost of money. A better borrowing reputation lowers the rent on every loan for life.

The poor pay debt off as fast as they can. The rich ask what the spread is and how many dollars they can control. Same loans, same rates, one number.