Thought for today:
Secured debt is debt that’s backed by collateral, such as a house, car, or other asset. When a person borrows against collateral, they guarantee that they will turn over this property to the lender if they default on payments.
“I once took out a home equity loan to build an accessory apartment that I was going to rent out. The problem was that I never calculated my ‘break even point’ – the point where the loan would begin to pay for itself, and I would be cash-positive. There’s no point in using secured debt if you won’t have positive cash flow for so long that you can’t sustain the monthly payments. Ever since then, I think through any investment loan.”
“One time I needed to buy tires for my car but I didn’t have the money. I did own a guitar and sound equipment that together were worth the cost of the tires, so I asked my parents for a loan and to hold my music equipment until I could repay them. They didn’t want to hold the guitar, but I made it clear it was necessary for my sanity, and that the equipment was theres if I couldn’t repay them. I felt more confident knowing I had something I had to offer.”
“Putting up collateral makes me more mindful of the cost of money because I risk losing an asset if I don’t keep up the repayment schedule. It doesn’t mess with my brain like unsecured loans did.”
More about collateral:
Collateral agreements should be in writing. Examples include turning over a prized antique for a temporary loan to pay for a car repair – or, more formally, a mortgage agreement.
It’s not wise to commit to a collateral loan lightly. We are willing to turn over the asset if we can’t pay on time.
Meditation for today:
Integrity leads to peace of mind. Therefore, align your actions with your beliefs.
Affirmation for today:
“I will take my time and not feel pressured when I make important money decisions.”
“I communicate clearly about all my agreements.”
Click the book image for product information.
Some links will bring you to other sites. Anything you buy (not just the book shown) on Amazon earns us a (very) small commission, which does not add to your cost… It’s a “Win-Win”!
Copyright 2015, PlentyOfTimeMoneyAndLove.com.