What Is A Good Reason To Get A Loan?
When it comes to financial planning, there’s a lot to think about.
You need to have an emergency fund, you should save for retirement, and you may also want to invest to grow your money.
But what if you need money fast?
You could take out a loan.
Loans are easy and convenient way to get the money you need without having to sell any assets.
While I don’t endorse payday loans, or so called ‘indulgent loans’ to pay for a wedding or a holiday, there are loans that are worth it.
Namely – loans that could help you make more money (i.e positive loans).
Below are loans that are worth taking, in my opinion:
1. Business loan – to help you start or grow your business
Many entrepreneurs use loans to finance their businesses, especially when they’re first getting started.
This can be a great way to get the money you need to buy inventory, equipment, or even office space.
For small or medium-sized businesses, you can apply for SME loans to get your business off the ground.
The great thing about SME loans is that they can also help businesses that may not be eligible for traditional bank financing.
On the other hand, if you’re starting a larger business, you may want to consider an SBA loan. These loans are backed by the Small Business Administration and typically have lower interest rates than other types of loans.
You can often get approved for a loan and receive the money you need within a few days. Some lenders even offer same-day or next-day funding.
As an added benefit, you can now go through the whole process online without ever having to leave your home. Just make sure to check the terms and conditions before taking out a loan to ensure you understand the repayment process.
It’s important not to take out too many loans – not only will they be hard to keep track of, but you’ll be paying huge amounts in debt each month. Know when to consolidate and refinance debt to make it more manageable. Consider getting professional help to pay off your business debts.
2. High-interest debt consolidation
Taking out a loan can be a smart move if you want to combine pricey credit card balances. The reason for this is because the interest rates on personal loans can be much lower than on these other types of debt.
If you’re carrying high balances on multiple credit cards, they’re probably costing you a lot in interest payments, and they’re likely lowering your credit score.
Using a personal loan to pay off your credit cards, a process known as debt consolidation, can let you simplify multiple bills into one, reduce your interest charges and improve your credit score.
When you use a personal loan to pay off your credit card debt, your credit utilisation ratio will drop and your credit score will rise accordingly. But you must be careful not to rack up new charges on your credit card that you can’t pay back or you’ll end up worse off than before.
3. Financing a large purchase without relying on credit cards
If you need money to improve your home to increase its value, or buy a car that could help you run your business better – taking out a loan could be cheaper than using a credit card.
Use the money to do things that will add to the value of your home, like adding a new bathroom or remodeling a kitchen.
When you go to sell your home, you will hopefully get back all the money you put into it, including profit.
NB! I wouldn’t recommend taking out a loan for major life events like weddings, anniversary parties or holidays etc. These events should be planned for and saved for in advance.
4. Sudden emergency expenses
Big-ticket repairs or medical emergencies can come out of the blue, but they can be non-negotiable.
Using a loan can help you manage these expenses and take a little stress out of the situation.
By taking out a personal loan, you don’t necessarily have to put up any collateral to qualify. That means you won’t have to put your home or car at risk if you can’t make your payments.
Of course, there are some exceptions. But, in general, most loans don’t require any collateral, which can give you peace of mind knowing your assets are safe.
However, it’s important to note that unsecured loans typically have higher interest rates than secured loans.
So, if you’re considering a loan, be sure to compare the interest rates before making a decision.
Some loans are worth it.
Whether you need the money for your business, a large purchase, to consolidate debt, or to cover unexpected expenses, a loan can give you the financial boost you need.
Just be sure to do thorough research to find a loan with competitive interest rates and terms that fit your needs.