Insider Secrets: How the Rich Legally Wipe Out Debt Fast

If you’re in debt, you don’t have to stay that way. Making regular monthly payments, being more prudent with your expenses, and boosting your income can get you out of debt faster. 

While everyone knows the basics of paying off debt, there are a few advanced strategies that rich people use to legally wipe out debt faster than most people. Using these insider secrets for yourself can make your debt more manageable and accelerate your path to no credit card balance. Here’s what you should know if you want to use the same strategies as the wealthiest people in America.

1. Strategic Debt Negotiation

Rich people often use strategic debt negotiation to reduce how much they owe. This approach works for people who are having a tough time covering their financial obligations. Creditors may prefer to negotiate lower monthly payments than see a borrower default. Rich people sometimes split up their companies into multiple corporations and separate them from their personal finances, making it easier to declare bankruptcy with one corporation and proceed undisturbed with the others.

If your corporation goes bankrupt, you won’t receive any type of hit to your personal credit score. The credit scores of your other corporations will also remain intact. This setup gives rich people leverage when negotiating debt if one of their corporations is on the verge of collapse. Using debt negotiation for your personal debt instead of debt tied to a separate corporation that you own will have a negative impact on your credit score.

However, debt negotiation can also work in good times. You can negotiate a lower interest rate on your loan if you are a regular customer and borrow more money than the average person. A bank makes more money if they give someone $10 million at 2% APR than they would from someone who borrows $10,000 at 20% APR. Rich people use this to their advantage and command much lower rates than the average person.

2. High-Velocity Cash-Flow Recycling

High-velocity cash-flow recycling is another popular strategy that involves using low-interest debt to pay off high-interest debt. Wealthy people often use short-term HELOCs to refinance high-interest credit cards. That way, they only have to contend with an APR below 10% instead of an APR that can be well above 20%. Furthermore, some wealthy people score lower APRs with their HELOCs since they are loyal customers.

For instance, some banks offer HELOC APR discounts if you have enough assets with that institution. Those assets may include money in your savings account, stocks in your brokerage account, and any other assets with the bank.

After using cash from a HELOC to cover credit card debt, the individual then gradually pays off their HELOC. If the situation calls for it, the borrower will then tap into HELOC funds once again to pay off new credit card debt or invest in long-term assets. Real estate investors often use HELOCs as a down payment source when they want to buy a new property and scale their real estate portfolios.

3. Tax-Advantaged Debt Forgiveness Vehicles

Some financing methods allow you to reduce your tax burden while accessing capital. For instance, if you use a personal loan for business purposes, you can deduct interest payments from your taxable income. If you start a C-Corp, you can use the Qualified Small Business Stock exclusion to avoid paying capital gains on the sale of their small business shares. 

Consumers and business owners can also capitalize on balance transfer credit cards to reduce their debt. These cards allow you to enjoy 0% APR for 12-24 months, depending on the issuer. 

Bonus Section: Automated Wealth-Builder Apps

You can use several resources to generate wealth and pay off debt. These are some of the top wealth builder apps people use:

• Wealthfront: It has a robo-advisor and various features that enable automatic investing.
• Mint Wealth: This personal finance app helps people manage their budgets and establish financial goals.
• Honeydue: Couples can use this app to monitor each other’s personal finances and work toward common goals.

While these apps are some nice extras, you will want to have the apps for your bank and brokerage firm on your smartphone. Having these apps makes your finances more accessible and can help you make automated investments and payments.