5 Good Reasons to Borrow and One Bad One

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A personal loan promises a quick injection of cash into your budget, but is it always a good idea to inflate your spending plan with borrowed money? Check out this list below if you aren’t sure when it’s appropriate to rely on help. It shows you examples of when to use installment loans and other financing options, as well as one time when you should skip them.

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1. Auto Repairs
Your car doesn’t start one morning. Your tire blows on the highway. Or your driveway shows a growing oil slick leading from your vehicle’s undercarriage. These problems need immediate fixes if you rely on your car every day.

Without savings, an installment loan may be a backup in an auto emergency, provided it isn’t your usual maintenance and upkeep costs.

2. Education
Let’s face it — earning an education is expensive. Once you add tuition, fees, and room and board together, you could be paying $20,770 a year at a public school or $46,950 at a non-profit private school.

Borrowing for an education may be a good idea because it’s an investment in your future. A diploma is a hot commodity that could bump up your salary. CNN reports college grads may earn as much as $30,000 more than a high school graduate. Just make sure you’re applying for a student loan and not an installment loan that’s intended for emergency use only.

3. Medical Bills
Without your health, you have nothing. Sadly, many routine procedures, medication, and services that people need come at an exorbitant cost.

Luckily, a variety of personal loans are available to help you afford anything from an unexpected trip to the clinic to an emergency surgical procedure following an accident.

4. Homeownership
It doesn’t matter where you live, a house is one of the most expensive purchases you can make in life. Mortgages are there to help you escape the rental market and get a foot on the property ladder, even if you can’t afford the house outright.

That being said, it only makes sense when you have a healthy down payment and emergency savings. This will help you bring down your monthly mortgage payments and prepare for costly repairs.

5. Household Maintenance
Prepare all you want, but sometimes, life throws you a curveball. You may end up emptying your emergency savings to fix a leaking roof in the winter, only to realize you have a serious flooding issue in the spring. An installment loan may help you take on these unavoidable repairs.

+1 — Recurring Bills
Recurring bills are expenses you can expect to pay every month. Things like rent, groceries, and utilities are perfect examples of your recurring bills.

It’s never a good idea to take out money to pay these expenses. It’s indicative you’re facing a greater financial problem than an installment loan can solve.

Do You See the Difference?
While the first five purchases above are distinct from each other, they share one thing in common: they’re exceptional expenses that you don’t make every day.

Auto repairs, medical bills, and household maintenance can crop up out of the blue, making them hard to budget for if you live paycheck to paycheck. Meanwhile, your education and a house are so expensive that it could take you more than a lifetime to save up what you need.

It may make sense to borrow in these situations, but don’t take this for granted. Always compare your options before you commit to anything.

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5 Good Reasons to Borrow and One Bad One
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A personal loan promises a quick injection of cash into your budget, but is it always a good idea to inflate your spending plan with borrowed money?
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