In finance, few questions are as divisive, or as dangerous, as this one: 

Should you borrow money to invest?

Most people are taught to avoid debt at all costs, live within their means, and fear owing anyone. Yet behind the scenes, the wealthy do the opposite … They borrow constantly.

The uncomfortable truth is that the rich use debt to get richer, while the poor use debt to survive.

How the Wealthy Use Debt Differently

Contrary to popular belief, the rich rarely use their own money for growth. They use other people’s money; loans, leverage, or credit lines, to multiply opportunities.

They understand that money has a cost, but time has a bigger one.

  • Elon Musk, for example, used loans backed by Tesla shares to fund new ventures.
  • A few Nigerian developers build entire estates using bank facilities, not personal savings.
  • Large corporations borrow billions at low interest rates to expand operations and capture market share.

For the wealthy, debt is not a dangerous action, but a tool that multiplies returns when managed wisely.

Why Debt Feels Dangerous for Most People

For the average person, borrowing usually feels painful, stressful, and expensive.

And the reason is a lot of people borrow from a phase of emotional decisions, and strategic ones.

So they end up borrowing to buy liabilities; new cars, phones, weddings, or lifestyles they can’t sustain, instead of assets that generate cash flow.

With Nigerian interest rates on personal loans hovering around 25–35%, and inflation eroding disposable income, this kind of borrowing can and will sabotage your finances.

Good Debt vs Bad Debt

While there are (2) classification of debt, the real difference lies in how each group defines debt.

  1. Good debt (productive debt): Loans that acquire or build assets that generate income or appreciate in value.Examples: buying land in a developing area, expanding a business, or financing profitable inventory.
  2. Bad debt (unproductive debt): Borrowing for consumption or depreciating assets.Examples: buying luxury items, vacations, or high-interest personal loans for lifestyle expenses.

The wealthy only borrow when the expected return on investment (ROI) is higher than the interest rate.

In simple terms:

“If your money is not earning more than it costs to borrow, you’re losing.”

What is The Cost of Borrowing 

One of the biggest financial inequalities is the cost of borrowing.

  • The wealthy borrow at single-digit interest rates because they have collateral, credibility, and corporate structures that lower risk for lenders.
  • The masses borrow at double-digit rates because they have neither.

A billionaire might access 8% debt through offshore loans or asset-backed financing, while a small entrepreneur struggles with 30% microfinance loans.

So, the rich get richer not only because they earn more, but because their money costs less.

When Borrowing to Invest Makes Sense

Can the average person still use debt wisely? YES! but only with the right mindset and method.

Borrow money to multiply certainty, not to chase luck.

Here are key rules to follow:

  1. Borrow for expansion, not experimentation. If your business or investment doesn’t have predictable cash flow, don’t fund it with credit.
  2. Match your loan tenor to your cash flow cycle. Don’t take a one-year loan for an investment that yields returns in five.
  3. Borrow against tangible assets, not hope. Loans secured by land, inventory, or receivables are safer than loans backed by salary or expectations.
  4. Always calculate ROI vs interest; that is, If ROI is less than interest, don’t borrow.

To note in Nigeria, where borrowing costs are among the highest in the world, debt must be used strategically.

Borrowing to invest only makes sense if:

  • You operate in a high-margin business (e.g., trade, export, real estate).
  • Your capital turns over quickly (within 6–12 months).
  • You have natural hedges (e.g., dollar revenue or stable collateral).

Otherwise, I will just tell you that you are  not investing, but working for your lender.

That’s why many wealthy Nigerians borrow offshore or through corporate vehicles that reduce cost and currency risk.

So, should you borrow to invest?

The answer depends on your sophistication, not your ambition.

  • Yes, if you understand leverage, risk, and cash flow.
  • No, if you’re guessing, gambling, or hoping things will work out.

Borrowing to invest is not inherently risky, borrowing without clarity is.

The difference between a calculated risk and a financial disaster is often just one decision away, a clear plan showing when, how, and why the money will return.

And with Balancc, you can create that plan confidently.