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Expat financial advice: D is for debt…

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By Simon Danaher - May 29, 2015

...the bogeyman of the financial world

Debt. Just the word itself can bring some people out in hives. It probably has the worst connotations of almost any financial term and, in some respects, rightly so. The word is synonymous with home repossessions, the Global Financial Crisis and the ongoing turmoil in Greece.

Just this week, the head of the European division of Goldman Sachs Asset Management, Andrew Wilson, warned that the world is “drowning in debt”, further promulgating the idea that all debt is bad.

Simply defined, a debt is money owed which has been borrowed. In almost all circumstances the debt will amount to more than the original sum which was lent. In this way it is profitable for the person or institution to lend in the first place.


Is all debt bad?

At AES International we believe the word’s connotations unfortunately overshadow what can be a very helpful tool for nearly everyone. Having ready access to lending (debt) and therefore cash is a necessity for businesses both big and small, while being granted a mortgage on a first home (usually the biggest debt anyone will ever take on) is one of the happiest days of many people’s lives.

There are other ways that debt can be a positive force too, particularly in the current environment when interest rates are at historic lows and it is therefore relatively cheap to borrow.

For example, when thinking of expat investing, people are attracted to buying property, either purely as an investment for rental income, as capital growth, or for loved ones back at home to live in. Many, though, do not have the ready cash to make an outright purchase.

In this circumstance, having access to lending which can be secured against either property or other assets such as investments, can be a hugely beneficial.

It is also possible to amplify returns by borrowing too. This of course does carry additional risk and is not suitable for everyone, but it can be a very helpful and potentially lucrative way of using debt to your advantage.

Known as ‘Lombard lending’, private banks can lend against assets which can be liquidated easily, such as stocks, bonds or select life insurance policies with a surrender value.

The benefit of using a Lombard lending facility is that you can take advantage of short term investment opportunities, without having to sell any of your existing investments.

At AES International we believe, in the right circumstances, and with the right advice and intentions, debt can be a force for good. Through our Private Banking team, we are able to offer the types of lending described above, plus a lot more.

Click the link below if you would like a free, no-obligation conversation with a member of our Private Banking team to see if there is a private banking solution which suits you.