Place Holdings: Borrowing in some cases is bad idea

Posted By: Matt in Loans on 12/30/2016 at 14:42:26

What's the first thing that comes to your mind when you talk about borrowing money·

For starters, you're probably start to think about the idea of asking a friend or family member for money more so than actually borrowing in the traditional sense, such as a car, home or another purchase that requires you to ask a bank or financial institution or lender.

Borrowing money can be a good thing, as in the case of the aforementioned examples, when you have transportation needs or want to invest in a house. Most of us don't have $30,000 lying around for a car or another few hundred thousand for that home.

So, borrowing always is the necessary choice.

But sometimes, borrowing can be bad and extremely ill advised.

Most of that centers on two major points: unsecured borrowing and borrowing for something that wouldn't be deemed a necessity.

As for the former, unsecured borrowing means you have nothing as far as collateral for the loan (i.e. you can't tie it back to something like a car or home). This mostly is credit card debt, but borrowing in this fashion is even more atrocious if you are using that borrowed money for day to day expenses or paying bills. That is more of a red flag that you need to budget differently or rethink how you're spending.

Besides never borrowing money to pay bills, you might want to consider against borrowing for something like a wedding or to go on vacation, which fits into the latter representation of borrowing when you really don't need to.

Weddings are often a place where young couples begin their foray into debt rather quickly with nuptials that cost in upward of $40,000 or $50,000, a large number and one that isn't going to be easy to pay back. That sort of debt seems more fitting for a down payment on a house or putting it in a savings account for just such an emergency. Even using that kind of cash would be better served as student loan debt in order to go back to school, get a Masters degree or something of that ilk versus having one day, albeit an important one, responsible for that lump sum of money counting against you and your new spouse so quickly after you get married.

Vacations are another unsecured pratfall for the majority of people, mostly because you argue that you can either afford it or you need it, so going into debt or borrowing money to go on a trip is justify the stress relief it provides. That can't be argued but when you come home that first payment or credit card bill is going to find you at some point, so the stress factor is a moot one.

Borrowing money often can't be avoided but can be prevented as far as doing it too much and without the right reason behind the move.

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