One of the biggest barriers to becoming a millionaire is high-interest consumer debt. While some types of debt, such as modest business debt or real estate debt, can help you leverage your capital to create lasting wealth and become a millionaire. But, if you are shackled by high-interest consumer debt and a poor credit score, you will find yourself unable to reach your financial goals.
Paying Down High-Interest Consumer Debt
When you have high-interest consumer debt, a great deal of your money goes toward interest payments – which go straight into someone else’s pocket. Additionally, this type of debt can weigh on your credit score more heavily than some other types of debt. If you want to stop using your financial resources to pay interest to someone else, you need to make a plan to pay off your high-interest consumer debt.
As you pay off your consumer debt, you will see your credit score improve over time. A good credit score can help you receive better financing options later on. If you want better interest rates on business loans and real estate loans, your credit matters. Managing your credit with the help of paying down consumer debt can help you move forward with plans to build more wealth.
Make paying down your consumer debt a high priority. As you reduce your debt, you will find that you have more money available to you in order to invest in other ventures. Putting your money to work on your behalf and earning interest is always better than paying interest to someone else. You can’t build wealth if you are constantly paying interest on consumer debt.
Using Your Good Financial Reputation to Wisely Leverage Your Capital
As you pay down your high-interest consumer debt, you can begin using your resources for other purposes. Wise debt can actually help you earn more over time, leveraging your capital. However, when you leverage your available capital, it’s important to be choosy: Only borrow to fund assets. In some cases, this can include borrowing to start a business, or borrowing to invest in real estate.
Your credit score matters anytime you want to borrow money. You can acquire your credit score online, and get a good idea of where you stand before you approach lenders. A good credit score can help you get a loan in the first place, as well as ensure that you receive the best possible terms. Good credit can save you hundreds – and even thousands – of dollars in the interest you pay while funding the assets you use to get ahead.
Of course, even good credit won’t ensure that you are approved for a loan. You need to show the lender that you have a solid plan. A good business plan is required if you expect to receive a small business loan. Due diligence and research is needed if you want to get a good deal on your real estate, and if you want property that is likely to generate income. With smart planning, good credit, and low levels of high-interest consumer debt, you should be able to get a good start on building wealth for the future.
Pinyo is the owner of Moolanomy Personal Finance and an entrepreneur with over 20 years of business experience. He is interested in business management, investing and wealth management. He has written for many online publications, including American Express Currency and U.S. News Money.