Valid reasons people borrow money
This article is about valid reasons people borrow money responsibly. Everyone in this day and age has different opinions about borrowing and debt. Some are strictly against the notion of borrowing money and others are fine with it. Both opinions are respected.
It doesn’t matter how financially responsible you are, there comes a time when borrowing money is the only way to stay afloat. Such a time could be some racked up medical bills. Or a car break-down that requires you to get a new one. Perhaps you need to pay off multiple debts at a lower interest rate. Or you urgently need to pay for something with cash.
Taking out a loan for these reasons is often a sound financial move when you consider the monthly payments and if it fits into your budget. Here are 4 valid reasons people borrow money.
4 Valid reasons people borrow money
Investment and net-worth growth opportunities
Investment opportunities are everywhere if one looks close enough. They come in many different forms like investment in a thriving business, or starting your own new business. You may want to increase your net-worth by purchasing a house or a piece of property. You could even want to improving your existing house. Investing in your education is also an opportunity to increase your net-worth. This could be a college degree or a Masters program.
More often than not, when the price is a good bargain, the seller or provider would require cash payment. Unfortunately, most people can’t afford to pay for business investments, property, or higher education. In such instances getting a personal loan or a business loan becomes the best option for you to be able to pay cash for a down payment or full payment.
2 Opportunity Costs if you don’t borrow
Closely related to your investment and net-worth growth opportunities, there are times when borrowing makes sense than paying cash. You could have money that was pumped in a business and bringing good retains on a monthly basis or money set aside your existing business or another one. Or you may have cash reserved for a big financial goal like saving up for retirement or a dream vacation. Because you are on track on your savings or existing business ventures, you wouldn’t want to divert those funds and derail your financial goal. So, when an opportunity comes for another investment or opportunity to grow your money, borrowing becomes a good bet. Of course you’d need to compare the cost of borrowing with the opportunity costs of not borrowing to decide if it’s a smart decision to take out a loan or not.
Do your due diligence and take calculated steps when such opportunities come your way.
Debt Consolidation and savings options
When you find yourself in a situation where you have multiple debts to pay, consolidating those debts into one becomes the easier first step to clearing them off. This is known as debt consolidation. Investopia defines Debt consolidation as the act of taking out a new loan to pay off other liabilities and consumer debts. Grouping of all your debt into one makes it easier to work out a time frame to pay off your balances without getting overwhelmed.
And if your existing loans are, say, 5-10% higher than getting a personal loan, you’d save a considerable amount of money getting a personal loan. Do your research and find out what new rates you can get that are lower than your existing debts.
In these unprecedented times, emergency bills are constantly coming up and most of them are unavoidable. An emergency room trip can cause a major financial strain on you especially when you don’t have health insurance. The PWC report of 2017 shows that less than 10% of the Zambian market have health insurance cover. Even if you happen to have insurance cover, having surgery would still require you to cover part of that bill. All kinds of surprise medical emergencies usually come up and in most cases require cash for the bills to be settled.
Another emergency that you may come across is the untimely death of a loved one. Funerals of loved ones are usually expensive and may require you to borrow money to pay cash for all costs.
The bottom line
There are many valid reasons people borrow money and you may have your own. Whatever the case, borrow responsibly. Consult with financial advisors. At premierCredit, we not only help with your finances but offer great financial advice and financial solutions. Got any of these valid reasons to borrow money? Get in touch with us.