Should I Get a Loan - Why Borrow Money?

People borrow money for all kinds of reasons.  The common reasons are buying cars, houses, furniture and paying off other debts.  The concept of borrowing money to buy something now and pay back later has only become readily available to people within the current generation.

Borrowing money can be both positive and negative. A major reason why many people borrow money is for the convenience of having something that they can use now rather than later.  If you need something straight away, borrowing money means you don't have to save over long periods of time before you can get what you need or want.

Borrowing also allows you to spread the cost of a big item over time.  Not many of us have $20,000.00 lying around to buy a new car.  Getting a loan can help you purchase large items in an affordable and manageable way.  Getting finance is very handy!  We live in a society that makes borrowing money available for individuals.  The trick is to know why you want the money and where to go to find the best borrowing option for you.

There is also a flip side to borrowing money, one that many of us can get caught out by if we are not wary.  It is easy to spend more than you mean to and buy things you don't really need or want.  You will also end up paying more money getting a loan than if you had paid cash, because you will have to pay interest on the money you have borrowed. Interest is the money you pay the bank or finance company on top of the loan amount for the benefit of being able to lend the money.

Remember, the golden rule to borrowing money is:  Do you need it? Do you want it? Can I afford it? Do I have the discipline to make regular repayments? Taking into account all of the above points can help you to decide if you are ready to borrow money.

ICAN suggests starting with a savings plan before taking out a large loan. By starting a savings plan, you can determine if you can make your future loan repayments. Your savings plan will also show the credit provider you are able to pay back the loan. With a healthy savings stashed away, by the time you are ready to get a loan, you won't need to borrow so much money!

Once you start saving you might decide that its easier to just save the amount you need and pay cash for what you want.