Using Debt to pay off debt with Notes

[Bryan Pham]

Hi BP,

Has anyone have success stories with using notes to pay off debt? 

[Dave Van Horn]

Hi @Bryan Pham,

Just saw this thread pop up again and thought I'd chime in.

I've used notes to pay for all types of debt. Probably the most beneficial of which was my son's student loan. What I did in that scenario was I took out the student loan, and used a fraction of the money that I would have used to pay for tuition to buy a couple notes. When it came time to start making payments on the student loan 4 years later, I had a small portfolio of notes paying the loan payments for me (and then some). So basically I paid for my son's tuition with 1/5th of the money.

Plus, the note I bought had a longer term than the student loan so now that the loan has been paid back, it's still paying me today! The student loan interest can be a deduction too for some folks depending on their yearly adjusted gross income.

I also use notes to pay for all types of things. This isn't debt per say but one thing I haven't seen mentioned was insurance. This is simply done by over-funding my policy, borrowing the money out at 4% or 5% to purchase the note, and making the spread. The spread enables me to get low or no cost insurance.

Lastly, this isn't my personal example but my partner used notes to pay for the addition on his house. The way he did it was he took out a HELOC to do the addition and he had some extra money leftover, which he then used to purchase a note. That note paid back the HELOC so he basically got a free addition to his house and now gets to write off the home equity loan.