Debt is often described as “cheap” or “expensive” based on interest rate alone. But cost is not just about pricing — it’s about fit.
Debt becomes expensive when it is misaligned with how income is earned or how capital is deployed. Structures that look efficient on paper can introduce hidden costs when they don’t match reality.
Examples include:
● Rigid payment structures for variable income
● High leverage paired with thin liquidity buffers
● Short-term debt funding long-term assets
● Structures that limit future refinancing or repositioning
In these cases, the cost shows up indirectly: forced sales, missed opportunities, rushed refinances, or stress-driven decisions.
Cheap debt is only cheap if it:
● Supports cash flow consistency
● Preserves optionality
● Allows for adaptation over time
● Aligns with the borrower’s actual financial behavior
When debt constrains rather than enables, its true cost is far higher than the interest rate suggests.
The goal is not to minimize cost in isolation. It is to build structures that remain rational across different scenarios.
