Top Reasons Why the Rich Take Loans

Do rich people have loans? Some of you might think that the wealthy are debt-free, but many of them borrow money as well but for different reasons. You need money to make money, and the affluent know this. The more money a person has, the more he can borrow.

Wealthy people seldom borrow money to buy what they want because they almost have everything they need. They take out a loan because they want to enrich themselves further. Surprisingly, contrary to what many people say that debts can make you more miserable, the rich believe that a loan can make them more productive. Here are the top 5 reasons why the rich take a loan.

  1. Buy assets

Rich people use money that they borrowed to buy assets or things that could generate money. Wealthy people in business may take a loan to finance the construction of his hotel or to purchase real estate, which can earn him more money. Using money that you borrow to go on a cruise or to buy a new car is not the proper way of using borrowed money. While the rich amass a fortune from the amount they borrowed, poor people like us are struggling to make ends meet to pay our loans.

  • Start a business

Why work for others when you have a brilliant business plan that can bring in a fortune? Many rich people started small and ended up with huge profits. A lot of finance companies would be happy to extend a loan to someone who can present a comprehensive and sound business plan.

  • Borrow to finance a business that would bring in returns more than the cost of the loan

Borrowing money to buy a house, stocks, and other items that you can sell later at a profit is another reason why rich people borrow money. A stock that cost $7 today can be worth ten times or more than the original price. The same is true when you buy land because its value can appreciate as years buy. Wealthy people would never take a loan unless they can make more money out of it.

  • Use collateral that they are ready to lose

When choosing a secured loan, rich people would use assets that they can afford to lose without affecting their lives. They would never mortgage their house because they know that losing it can make their family homeless. If they have several properties, they will use one as collateral. When you own several residential units for rent, you can use one to secure your loan. If you default and the lender seizes your property, you still have several groups left.

  • Spend their money on more profitable ventures

Believe it or not, rich people take home loans just like you. However, they buy houses that are worth several million. But why take a home loan when they can pay in cash? The interest for a house loan that is payable in 15 years has an interest of 3.4% per year. If they invest the amount they should have paid for a house, they will earn a lot more than the annual percentage interest of their loan.

Pay taxes

Another expense that the rich seldom pay in cash is their taxes. Instead, they would take credit cards that offer 0% interest in the first year of use. They pay their taxes using the credit card without paying charges while the money they should have spent on fees is earning more money in the bank or as an investment.

Funding for education

Why pay cash for a university degree of your child when you can get a student loan to finance his education? Rich people have high credit scores, which qualifies them for a low-interest loan. You can invest the money in other profitable business ventures. If your child lands a high-paying job after graduation, you will get a high return of investment.

Making opportunistic investment

A friend relocating to another state wants to sell his house quickly at a low price. Someone rich would grab this opportunity to invest in something he can sell later at a high price. However, he would not use cash to pay. Instead, he would get a loan that has a low interest. The deal could earn him a significant profit.

Expand a business

Putting up several branches for your business can cost tons of money. People in the business industry would instead take a loan to finance it rather than pay in cash. Because they have money, banks are willing to lend more. If they need a million, they can borrow that amount at a low-interest rate while their money is earning huge profits.

It is wrong to think that the rich do not have debts. They probably owe much more than you do. But because they invest the money they borrowed instead of spending them on things that cannot make money, their debts make them more productive.

The Top 5 Best Places To Get Loans from When You Need Money

The need to borrow money is a reality, not an option. Everyone, at some point in their life, will need to take out a loan. Whether you need to pay for a medical procedure, you want to get new furniture for the home, or are simply a few hundred dollars short and have to pay your mortgage, you will need to know what types of loans you can get.

In the last 10-15 years more and more financing options have been developed, up to the point where it is now better to shop around and look for the best company or service, rather than go straight to the bank every time you need money.

This having been said, there is a big difference between banks, credit unions, financing companies, online commercial lending platforms, crowdfunding services, and peer-to-peer lending websites. They all offer you the ability to take out loans, however, the way in which they determine who is eligible for their services, and the terms and conditions that you will have to agree to are very different. In many ways, each platform caters to the needs of different types of individuals or businesses.

  • Go to your local bank

Banks may not always be the best choice to get a loan, especially if you have bad credit. However, they do offer the largest variety of financial services and products. They offer mortgage credits, personal loans, construction loans and credit lines for businesses, among others. The money usually comes from the deposits made by other clients, which are then taken by banks and given out as loans.

The main advantage when it comes to doing business with banks is the fact that the terms and conditions that they impose depend on your relationship with them. If you made your payments on time in the past, they will offer you a better deal.

  • Contact a credit unions

These often go under the radar. They are cooperative institutions controlled by their members. In most cases, these individuals are members of a community or an organization of which you have to be a part of in order to get a loan.

While they are similar to banks in terms of structure, they are non-profit organizations, which also means that their rates are considerably lower.

  • Peer-to-Peer lending

P2P services are usually found online. They are platforms that put borrowers in contact with lenders and supervise the financial affairs to ensure that everything goes smoothly. The way they work is simple. Borrowers create an account and are entered into a database. Lenders are then able to look at the listings and decide how much money they want to risk lending someone. A borrower may not receive the full amount that he is asking for from a single lender, but others may come and contribute.

  • 401(k) Plans

401(k)s are generally used to secure a stable retirement fund. They allow employees to invest money on a tax-deferred basis. These plans can be used as a way to get a loan, especially when considering that the money is basically yours and you are able to withdraw it without having to pay an application fee. The downside is that there is a 10% penalty if you are under 59.5 years old and want to permanently withdraw all the money that you’ve contributed.

  • Set up a margin account

These allow brokerage customers to borrow money that they can then invest in securities. The way they work is relatively simple, considering that the funds in the brokerage account serve as collateral for the loan.

As far as interest rates are concerned, these are often better than those offered by other platforms. Furthermore, if you have a considerable amount of equity in your margin account, getting a loan takes considerably less and the eligibility conditions are less demanding.


These are the options that you have to choose from when you need money. The best way to determine what type of loan you should get is to first consider what amount of money you need and establish what you want to do with it. Afterward, do the math and evaluate how much profit you will make and if it will be enough to both pay back the loan and to get you in a better position than the one you were initially. 

Keep in mind that this we have explained what each of them is and how it can help you, but you will still have to pay attention when it comes to deciding what platform to use. For example, there are hundreds of online commercial lending services and each of them has its own interest rate and penalties in case you miss a monthly payment. The same applies to crowdfund platforms. Some of them allow you to keep the money that you raise even if you don’t hit your goal while others will return the funds back to their respective owners.