Offer your thoughts or opinion on the input financial query or topic using your financial background.

At what interest rate should debt be used as a tool?
I've been taking all the cheap fixed-rate debt banks would like to give me lately. What Rate? In practice I find the only way I get a low-enough rate on a longish-term fixed-rate loan is to use collateral. That is, auto loans and home loans. I haven't seen any personal loans with a low enough fixed rate. (Student loans may be cheap enough if they're subsidized, I guess.) Here's how I think of the rate: If you look at https://personal.vanguard.com/us/insights/saving-investing/model-portfolio-allocations , the average annual return on 80% bonds / 20% stocks is 6.7%, with worst year -10.3%. That's a nominal return not a real return. If you subtract taxes, say your marginal rate (the rate you pay on your last dollar of income) is 28% federal plus 5% state, then if you have no tax deferral the 6.7% becomes about a 4.5% average, with reasonably wide variation year-by-year. (You can mess with this, e.g. using tax-exempt bonds and tax-efficient stock funds, etc. which would be wise, but for deciding whether to take out debt, getting too detailed is false precision. The 6.7% number is only an average to begin with, not a guarantee.) Say you pay 4.5% on a loan, and you keep your money in very conservative investments, that's probably at least going to break even if you give it some years. It certainly can and sometimes will fail to break even over some time periods, but the risk of outright catastrophe is low. If your annual loss is 10%, that sucks, but it should not ruin your life. In practice, I got a home loan for close to 4.5% which is tax-deductible so a lower effective rate, and got an auto loan subsidized by the manufacturer for under 3%. Both are long-term fixed-rate loans with collateral. So I was happy to borrow this money paying about a 3% effective rate in both cases, well below my rough threshold of 4.5%. I do not, however, run a credit card balance; even though one of my cards is only 7% right now, 7% is too high, and it's a floating rate that could rise. The personal loans I've seen have too-high rates also. Thoughts Overall I think using debt as a tool requires that you're already financially stable, such that the debt isn't creating a risky situation. The debt should be used to increase liquidity and flexibility and perhaps boost investment returns a bit. Where you're likely to get into trouble is using debt to increase your purchasing power, especially if you use debt to buy things that aren't necessary. For me the primary reason to use debt is flexibility and liquidity, and the secondary "bonus" reason is a possible spread between the debt rate and investment returns.