The rich get richer is a form of compounding. Sometimes this compounding is passive but most times it’s very active. One of the best ways rich people get richer is leveraging debt.  Yep, you heard that right: debt can actually be your friend if you know how to use it. In this post, we’re diving into what good debt is and how the rich use it to get even richer. Spoiler alert: it’s not just for the elite—you can use it too. Let’s break it down and get you excited about how good debt can pave your way to a richer future.

What Is Good Debt?

Not all debt is the villain it’s made out to be. Bad debt—like taking loans to fund liabilities—is a swampy pit.The harder you fight to get out, the deeper you sink. Good debt, though? That’s the kind that puts cash back in your pocket over time. It’s money you borrow to invest in things that grow in value or generate income. Think of it as planting a financial seed: you borrow now, nurture it, and watch it bloom into wealth later.

Here’s what good debt looks like;

  Mortgages for rental properties: You buy a place, rent it out, and the tenants’ payments cover the loan—plus, the property might be worth more down the line.

Business loans: A loan to start or grow a venture can turn into profits that outweigh the debt.

Good debt isn’t about spending—it’s about investing. It’s a tool to build something bigger than what you could afford with just your own cash.

How Good Debt Works as an Investment

So, how does good debt actually make you money? It’s all about leverage—using borrowed funds to control more than you could on your own. Imagine it like this: instead of saving up every penny to buy something big, you borrow smartly to get it now and let it start working for you sooner.

Here’s a relatable example:Say you want a ₦70,000,000 rental property. Paying cash means scraping together the full ₦70,000,000. But with a mortgage, you might only need ₦14,000,000 down (20%) and borrow the remaining ₦56,000,000. If that property goes up 5% in value in a year, it’s now worth ₦73,500,000. Your ₦14,000,000 investment just made you ₦3,500,000—a 25% return! If you’d paid cash, that ₦3,500,000 gain on ₦70,000,000 would only be 5%. That’s leverage in action: good debt amplifies your gains.

In a more relatable scenario; Imagine you want to buy a bigger sewing machine that would improve production efficiency and quality. You can take a loan to buy the machine and then increase your price to match the quality provided. This way the sewing machine is actively paying for itself. The best part is that you will own this sewing machine long after your debt is settled.

The beauty of good debt is that it’s an investment in itself. You’re not just borrowing—you’re putting that money to work in assets that can pay you back, whether through appreciation, income, or both. It’s like hiring a team to build your wealth while you steer the ship.

How the Rich Use Good Debt to Get Richer

Now, let’s peek at how the wealthy play this game. The rich don’t shy away from debt—they embrace it as a strategy. Here’s how they make good debt their secret weapon:

Buying appreciating assets: They borrow to snag real estate, stocks, or other investments likely to climb in value, often earning more than the loan costs.

Scaling up: A business loan can turn a small operation into a profit machine, with returns that dwarf the interest.

Tax perks: Interest on some good debt (like mortgages) can be tax-deductible, making it an even sweeter deal.

Controlling more with less: By using debt, they invest in bigger opportunities without tying up all their cash, leaving room to jump on the next big thing.

The rich see good debt as a partner in wealth-building, not a burden. They borrow with a purpose, knowing the returns will outpace the costs. And here’s the kicker: you don’t need a private jet to use the same playbook.

Before you dive in, let’s keep it real—good debt isn’t a free ride. It’s powerful, but it comes with risks. If your investment flops, you’re still on the hook for the loan. The key is balance: borrow wisely, not recklessly. Pick opportunities with a solid shot at paying off, and don’t bite off more than you can chew. When it works, though, good debt can be the boost that changes your financial story.

Take the Leap: Make Good Debt Work for You

So, there you have it—good debt is your chance to invest in yourself and your future. It’s not about getting buried in loans; it’s about using them as a springboard to wealth. The rich have been doing it forever, and now it’s your turn. Start small if you need to— a course, a business idea—and watch how it builds over time. You’ve got the tools; all that’s left is to use them.

Imagine where you could be in five years with the right debt working for you. More money in your pocket, assets stacking up, and a future you’re excited about. That’s the power of good debt—it’s not just borrowing; it’s building. So go for it. Take that step. Your richer self is waiting.

Smart Tips for Dealing with Legitimate Loan Companies

Ready to get started? Here’s how to borrow like a pro from legit lenders:

1. Shop around: Compare interest rates and fees—lower costs mean more profit for you.

2. Read everything: Know the terms inside out, especially penalties or hidden catches.

3. Check their credit: Stick with reputable lenders—banks, credit unions, or well-reviewed online options.

4. Ask away: If something’s fuzzy, grill them until it’s clear.

5. Know the rules: Brush up on your rights as a borrower to avoid shady deals.

With these in your back pocket, you’ll borrow confidently and keep the focus on growing your wealth.

There’s your crash course on good debt—now it’s up to you. Use it smartly, and it could be the key that unlocks your richer tomorrow. What’s your first move?

Bravewood provides Nigerian professionals with low-risk, high-return investment products, licensed by the Central Bank of Nigeria.