People have been
borrowing money for centuries. Lending institutions and banks survive despite
the many economic crisis because there are people who make a loan and they
aren’t always the poor ones who do. Businessmen, business tycoons, rich people,
billionaire, well-known celebrities borrow money for several reasons and they
make this industry of lending and banking one of the most profitable venture anywhere in the world.
There are a lot of reasons why people borrow money. These reasons or what the borrower plans on using the loan for, paved the way to a variety of loans and forms of borrowing to be available.
To Make a Purchase
People borrow money when they want to buy something. It may be a large purchase such as a property or a car, or something smaller like furniture, appliances or gadgets. Credit cards are the most common way to make a purchase when a person is short with cash or has no cash in hand.
For Experiences
People also borrow money to spend it on experiences – to go on a vacation or a cruise, to travel the world, to watch their favorite international artists perform live, or simply to dine in their favorite all-you-can-eat restaurant.
According to studies, people who spend their money on experiences over material things are happier. The memories collected from those experiences last longer and definitely matter above all things.
To Consolidate Other Loans
Another reason to borrow money is to pay off other loans. We consolidate other smaller debts into one larger loan, so we just have to settle just one monthly payment. But beware of this practice as this can lead to a larger issue of being over-extended financially and borrowing too much.
To Live Beyond their Means
Some people love to show-off, they love to always be on the spotlight, to stand out even if it means living beyond their means. Borrowing money is their way to satisfy the urge of having things that glitters, of being famous in their community, of feeling superior over other people. Some people take out a loan to make a lavish purchase of something they don’t really need. If this is your reason for getting a loan, maybe you have to think twice or even more.
Truth is, most people borrow to bridge the gap between their income and their expenses, instead of looking at ways to reduce their expenses. Taking out a loan and borrowing money is not really bad, especially if you are going to use it for investments such as a car or property like your own home or a unit that will be used for business or income generation. Just make sure to pay your debt on time, not just the principal but the interest and other charges as well. Paying your loan bi-monthly, if allowed by your lender will help you save from interest over the term of your loan. You see, there are a lot of good reasons to borrow money. Some of the valid reasons are car repairs, home improvement, utility bills, healthcare, medical expenses, and education.
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Remember that borrowing is not always the answer. Borrowing money for holidays, weddings, and nights out should never be a priority especially if you only have enough money for your needs. Borrowing money for wants will make you struggle in managing cash flow. Your financial mindset should be to save first if you want to spend money on something.
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