There are many people that would advise others never to borrow money. There is even an old-fashioned phrase ‘never a borrower or a lender be’. However, there are those that would argue that loans are extremely useful and we should all use them. Sensibly it is probably wisest to take a stance somewhere in the middle, but it is worth considering the advantages and disadvantages of loans so that you can make the right decision for you.
Advantages of Loans
As much as we are often told that loans are a bad thing, they do have many advantages. They can help us out of tight emergencies where we might otherwise have had to forgo a basic need and they can help us to better ourselves as well. Many focus on the cost of the loans and the stress that some people get when they owe money but they can really help.
Many people use loans to improve themselves. For example, many young people will borrow the money to go university which means that they have a lot more options when it comes to a career. They should be able to get a better paid job and this will mean that they will be better off in the future financially even though they have a loan to repay. The same should apply to any other sort of loan which helps with career development. A mortgage is similar in that a person will be able to be better off as a result. By buying your own home during your working career it means that you will be able to live rent free through your retirement. You will also have a house that you will be able to pass on to your children once you no longer need it. Loans can also be used to help out businesses also that they can expand and potentially make more profit; more quickly than if they did not borrow the money.
Loans are also used by people to buy things that they would not normally be able to afford right away. So, they can be used to spread the payment. People will use them for all sorts of things such as cars, white goods and home renovations. They are also used by some people to help them to make ends meet if they find that their salary is not enough to cover the cost of everything that they want or need to buy.
Disadvantages of Loans
Like all things, we have to pay for loans and some are more costly than others. The amount that you pay will depend on the type of loan and the lenders and some will offer much better value for money than others. This means that you should be careful about which you use and make sure that you feel you are getting good value for money from the option that you end up choosing.
One of the main problems that people face with loans is when they struggle to cover the repayments or delay repaying them for a long time so that the costs really add up. This is something that can be avoided though. If you make sure that you fully investigate the amount that you are expected to repay before you take out the loan and make sure that you will be able to manage the repayments, then you should find that you will be able to manage. However, if you take on a loan quickly and do not think about whether it will be affordable for you, then you can get yourself into difficulty.
Loans can also make the items you are buying with them the equivalent of being more expensive. For example, if you buy a car with a loan and the interest is 5% per year and you pay it off over 5 years, you will be paying 5% a year on what you owe more for the car than the ticket price. This is something that people do not often calculate and they may not have been prepared to pay that much for the car had they actually worked out what they have ended up paying for it. You should be able to work out or ask the lender how much you will be paying in total for the loan and that will allow you to decide whether you think that it is worth it.
Some people find the whole idea of owing money stressful and will have a negative impact on their health. This can be a shame because these could be people that could be positively helped by borrowing. However, the very best way to take the stress out of borrowing is to make sure that you can afford the repayments with ease. Then you should have no reason to worry at all.