The financial industry caters to borrowers from all walks of life, seeking funding for myriad causes. As a result, dozens of types of loans are available, many aimed at particular functions. Mortgages, for instance, are funded exclusively for the purchase or transfer of certain types of property – most commonly residential and commercial real estate. And government-backed student loans can only be applied toward college tuition and related expenses.
Despite the specialized nature of modern lending, some loans are issued with greater discretion, leaving borrowers to spend the money as they wish.
Personal loans and most forms of short-term financing are extended with few strings attached, placing spending discretion in the hands of those borrowing the money. Unfortunately, these flexible loans can become problematic, when cash is borrowed for ill-advised purchases. To avoid problems, hold high standards when spending borrowed money and don’t let easy access to financing color your spending decisions. Among others, the following examples represent good reasons to take out a loan.
Investing in yourself is almost never a bad idea. Truth is told, in most cases, money spent on personal improvement increases your earning power. College education and advanced certification, for instance, may open doors to higher-paying jobs, or add crucial credentials needed to earn a salary raise. An education loan (and some hard work at school) may be all that’s standing between you and higher take-home pay Federal student loans are available for U.S. students, issued by the William D. Ford Federal Direct Loan program. Interest rates and repayment terms offered by the Government are very competitive, so filing for public aid is a good first step. Private financing is also available, adding to federally-backed financial aid availability. Personal loans are commonly used to pay for classes furnishing fast funds to carry-over students until their financial aid checks arrive. It is important to compare various lending scenarios, in order to assemble the best college funding package for your circumstances.
Start a Business
Entrepreneurs need financing, so if a start-up is in your future, it probably calls for a loan. Borrowing to seed a business venture is a positive step, provided your business plan allows for growing pains and eventual profits. New businesses typical require years to become established, during which owners often work long hours, for little pay. Your start-up investment presents similar possibilities, so the pressure of carrying financing can add to the strain of a fledging enterprise. On the other hand, an old adage aptly points out “it takes money to make money”, and another succinctly identifies the nature of entrepreneurism, stating “nothing ventured, nothing gained”.
Relocate for Opportunity
Employment conditions continually evolve, creating new opportunities for enterprising workers. In some cases, relocation is the fastest path to prosperity and career advancement. A move with your employer likely includes compensation for the effort, but packing-up of your own devices can lead to considerable out-of-pocket costs. A short-term loan, funded to expedite an opportunistic move is another form of investment in your future, so the financing quickly pays for itself.
Add Value to Your Home
Homeowners typically maintain a “wish list” of renovations and improvements they’d like to complete. If your home would benefit from a makeover, it may make financial sense to borrow money, in order to carry-off the updates. Kitchen and bath improvements typically pay the greatest dividends, adding value, comfort and convenience to your residence. Other low-cost improvements include paint and landscaping, which are easily accomplished using a small personal loan or equity financing.
In some cases, borrowing money for a vacation can save you money. Better to fund travel with cash on hand, but a low interest loan represents a better alternative than paying travel expenses with a high interest credit card. It is up to you to crunch the numbers, and spending money on travel you can’t afford is a step in the wrong direction. A once in a lifetime travel opportunity or a long-anticipated retirement tour may justify borrowing for a leisure venture.
It doesn’t always make sense to go into debt, but when financing is justified, several types of loans are available. Investing in yourself, for instance, can become a money-maker, so taking a loan for education or an entrepreneurial venture makes good sense. Improving your home is another good way to spend borrowed money, and under some circumstances, borrowing for recreation is not an irresponsible approach.