There are some people that think that it is wrong to borrow money. They may think that it is too expensive, it is a con or that it does not benefit anyone. However, there are good and bad reasons to borrow money and it is sensible to be aware of these so that you can use borrowing to benefit you when you really need it but do not borrow money when you do not really need to.
To Buy Something Expensive
Most people will borrow money because they cannot afford to buy the item without borrowing the money. With some things this is a good idea but it is not always. For example, if you want to buy a house, so that you no longer need to pay rent, then getting a mortgage to borrow the money is normally a good idea. As long as you can afford the repayments and buy a house that is in a good condition, you will find that the loan will be worthwhile Although you will be paying interest and possibly other fees to the lender, as long as you keep covering the repayments, you should find that you will make back those costs due to not having to pay rent once the house has been paid for.
However, if you take out a loan to buy a brand new sports car, then you will not see the same gains. Hopefully, you will get a lot of pleasure out of the car, but you will not save any money. With the house, you will save the money you would have paid in rent and although you will be paying a mortgage for decades, you will then be able to live rent free for the rest of your life. You will have to pay to maintain the house, but if you bought it in good repair, this should not be too much. You will also find that in most cases the value of the house will increase in value as well. With the car, you will keep having to pay out on it and it will decrease in value and eventually will need replacing as it will probably wear out.
So you can see that although a loan can be very useful for buying something expensive, it also might not be a wise thing to do. It will very much depend on the item that you are using it to buy.
To get Something Quickly
Often a loan can be handy if you need to buy something quickly. If you have no savings and have an emergency, perhaps needing to replace a broken fridge or pay an electric bill, then borrowing money can be a very useful thing to be able to do. If we have savings, then it is cheaper to use those, but not everyone will always have some money available to them and so a loan might be a necessary step. However, some people will use them because they are not prepared to wait and save up for things. This is when they want the latest phone, to go on holiday or things like this which can wait, but they are impatient and feel the need to have them right away. This is when borrowing may not be such a sensible idea.
It is also important to make sure that when we borrow, we know how much it will cost us and what repayments we will be expected to make, so that we can work out whether we feel the loan that we have chosen will offer us good value for money.