What are some good reasons to borrow money?
May 5, 2007 by Michael Redbourn
Done sensibly, borrowing is a way to get money to invest in your future. Here are seven good reasons you may want to borrow money:
1. To buy a home
2. To buy a car
3. To save for education
4. To save for retirement
5. To start a business
6. To handle an emergency
7. To pay off debt at a lower interest rate
1. Buy a home
The majority of people can't pay cash for their home so they get a mortgage. A mortgage often costs less than rent and you end up owning a home.
2. Buy a car
A few people pay cash for a car but most of us borrow or lease one. Always consider the cost of borrowing against using your own savings.
Example: It may not make sense to hold onto a Guaranteed Investment Certificate (GIC) which only pays 3% interest if you'll be paying 5% interest or more for a car loan.
3. Save for education
A great many students enrolled in universities and colleges borrow money to get and to continue there and student loans are one of the cheapest forms of debt. They are also a good investment because graduates tend to make more money than non-graduates.
4. Save for retirement
You may want to borrow money to put into a retirement plan as it reduces your taxes, and your savings will grow in value.
5. Start a business
The type of loan you'll need depends on how much you want to borrow, how you plan to use the money, how long you'll need it and on how you intend to pay it back. Most people go to a bank, trust company, or credit union for a loan but other sources for financing include family and friends, equipment manufacturers, government agencies, and third-party leasing companies.
6. Handle an emergency
If the roof leaks, the pipes burst, or your car dies you may need to take out a loan to pay those surprise bills.
Tip: Look for the lowest interest rate possible. Never take out a high interest loan or use your credit card for large amounts. Try to pay back the loan quickly.
7. Pay off debt at a lower interest rate
A consolidation loan is a loan at a low rate which you then use to pay off several older loans that have higher interest rates. Sometimes people put all of the debt they owe on their different credit cards into just the one that charges the lowest rate. Others pay off their loans and credit cards by increasing their mortgage, which should have a much lower interest rate.
There are times when borrowing makes sense!
Make sure you understand the cost before you sign any loan papers and make sure you can afford the extra debt. It's important to shop around for the best interest rate you can get and not to borrow more than you need, just because you can.
Cash advance: Cash advance is a small, short-term loan used to cover an expense until your next pay day.
Fast cash: Applying for fast cash is quick and convenient with a three-step online application.