Many of us think of taking out a loan as taking on another burden. It's an extra cost we have to assume every month, an additional strain on our personal finances. And it's true: borrowing costs money!
There are, however, several circumstances where taking out a loan is beneficial for your overall personal and family financial situation. Here's a list of 8 such cases.
1. Student loans
University, masters, post-graduate, doctorate... Education is key for our development (and that of our families and our society) and usually costly so many people opt for a personal loan to finance their investment.
2. Cancelling debt
Taking out a new loan to repay an old one might sound like a wash, but it can have very positive effects on your finances: a new term to pay back, potentially better rates, or a new repayment plan more in line with your current financial situation.
3. Buying a car
If you start adding all the costs related to your old car (maintenance, insurance, fuel) and compare to a new car –including the purchase price– you might realise that a new (or used but in very good condition) car is an investment you can finance with a personal loan that will pay out in the long run.
Another investment we like to postpone because it's cumbersome, costly and, let's face it, messy. And yet, a loan can improve your accomodation, the value of your house in the market and, if you enhance the energy efficiency of your house, your personal finances.
5. Household appliances
Dishwasher & co., they all have a so-called "service life". Replacing these appliances can be costly - and they have a tendency to break down simultaneously! In this case, a personal loan can help us avoid uncomfortable situations.
6. Investing in the stock exchange
The idea behind it is to borrow funds to increase the earnings on an investment, much like a broker does. If you borrow some extra money, you might have access to certain types of investments with higher yield potential.
7. Emergency funds
We all have (or should have) an emergency fund. But some emergencies you cannot foresee and they might require a bigger financial effort than you had accounted for. And if you're not capable of refilling your emergency fund quickly enough, instead of using it up you might want to consider a personal loan to bridge the gap.
8. Your happiness
If you work hard, pay your taxes and are financially savvy, why not invest in yourself for once? That trip you always wanted to undertake can be financed - think of all the experiences you will gather!
So there you have it: a personal loan is a financial instrument that, when used wisely, can be a great investment. Be good at money and ask your financial advisor for guidance before borrowing!