The Power of Debt: It Isn’t All Bad

We hear the warnings constantly: Debt will ruin your finances. The reality is that some debt isn’t bad. In fact, a securities-backed line of credit can be a potent wealth-building tool for certain folks.

A piggy bank sits in front of a chalkboard with strong arms drawn behind it flexing their muscles.
(Image credit: Getty Images)

Most people view debt as something to be avoided at all costs. But that’s because most people don’t use debt properly. A prime example of improper debt use is the credit card. People charge too much, fail to pay the card in full at the end of the month, then find themselves unable to pay down the debt without also paying exceedingly high interest, often for years.

However, some kinds of debt, such as a securities-backed line of credit, or SBLOC, can be helpful. They can even save or earn you money. SBLOCs are rolling lines of credit based on the value of assets in your accounts. They’re excellent ways to use debt to your advantage.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Samuel V. Gaeta, CFP®
Principal, Director of Financial Planning, Defined Financial Planning

As Principal and Director of Financial Planning, Sam Gaeta helps clients identify financial goals and make plan recommendations using the five domains of financial planning — Cash Flow, Investments, Insurance, Taxes and Estate Planning. He is responsible for prioritizing clients' financial objectives and effectively implementing their investment plans and actively monitors the ever-changing nature of clients' financial and investment plans.