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Forum » Econbrahs: Is inflation good for personal debt
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Thread: Econbrahs: Is inflation good for personal debt

post 1658743713 03-28-2022, 07:40 PM
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Econbrahs: Is inflation good for personal debt

Im too dumb to understand this. If I took on debt 2 years ago at 3% is inflation good for it? Do you pay it off now or wait?
post 1658743993 03-28-2022, 07:45 PM
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  1. 5x10
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Only if your income keeps pace with inflation
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post 1658744023 03-28-2022, 07:46 PM
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Originally Posted By 5x10⏩
Only if your income keeps pace with inflation
he's on welfare like every other lib
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post 1658744043 03-28-2022, 07:47 PM
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Originally Posted By IronILLinois⏩
he's on welfare like every other lib
says the rapeugee that lives in chicago 😂😂
post 1658744133 03-28-2022, 07:49 PM
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  1. lockdev
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Are you talking about debt on income-generating assets? Assets in general?

Generally, "bad" debt is always bad, no matter what, and needs to be paid off asap.

Low interest debt varies by how the economy is doing and the direction it is headed. For example, if you have 3% student loans, and the market is returning 7%, then it's up to your risk appetite.

If it were me, I'd just pay the minimum, invest the rest in index funds, and ride out the economic chitstorm we're in. 3% really is jack chit when inflation is 8%+.
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post 1658744223 03-28-2022, 07:51 PM
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if earnings stay the same but everything costs more, then you'll have less money to pay your debt
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post 1658744493 03-28-2022, 07:59 PM
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There’s a lot of variables to consider

Neoclassical economics would suggest that all else being equal, interest rates would be set at a level such that assets generate a real return i.e. above the rate of inflation

Under this assumption, yes the face value of your debt is being deflated however you are also paying market rate to rent the capital so that you come out even (efficient market)

Once you relax the above assumption though, anything goes.

I could go on at length but in summary yes, now is a good time to be leveraged provided you are in assets that will hold their value even in the face of hyperinflation
Originally Posted By lockdev⏩
Are you talking about debt on income-generating assets? Assets in general?

Generally, "bad" debt is always bad, no matter what, and needs to be paid off asap.

Low interest debt varies by how the economy is doing and the direction it is headed. For example, if you have 3% student loans, and the market is returning 7%, then it's up to your risk appetite.

If it were me, I'd just pay the minimum, invest the rest in index funds, and ride out the economic chitstorm we're in. 3% really is jack chit when inflation is 8%+.
No

Leverage exists

Tax deductibility of interest exists
post 1658745133 03-28-2022, 08:13 PM
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No need to be complicated with it. The dollars you borrowed are worth more than the dollars you are giving back. Yes it is good for your personal debt in a vacuum.

This is not an excuse to take on more debt.

I would not pay the debt back at the expense of investing in a 401k.
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post 1658745263 03-28-2022, 08:15 PM
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tldr

depends
post 1658745783 03-28-2022, 08:25 PM
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If your income growth consistently exceeds the rate of inflation then you will do well. Assuming the interest on your debt isn’t sone crazy APR then over time, you will feel less of your pay going towards paying off debt.
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