There is probably no one who does not take one or more loans in his life. Many times loans are more or less a necessity if you are going to buy a home or a little better car, but many also legend to the consumption of home electronics, renovations, home furnishings and so on. Of course, there is nothing wrong with that, because it is not always you want to wait to renovate the home or buy new furniture for several years, but you should still remember that everything you buy with borrowed money becomes more expensive.
Most often better to save rather than borrow
The eternal question is: is it not better to save money and then buy what you want instead of taking a loan? Yes, many times it is so but not always.
When to borrow – example
- You are considering buying a new car because your old one is collapsing. For example, if you borrow USD 50000 with a maturity of 3 years with an interest rate of just over 5.5%, it will cost you about USD 4400, which is not so dangerous. On the one hand, it is USD 4000 that you could make someone more fun for, on the other hand it might have taken you over two years to save up to these USD 50000. So the question is if it is not better to take out a loan instead of waiting in this case.
- Your home is in dire need of renovation and new furniture, which costs USD 100,000. For many, it takes several years to save such a sum of money and then it may be worth taking a private loan instead.
- You see an offer on a TV that is reduced by maybe two, three thousand USD and that only applies today. Then you can actually profit from taking a fast loan and turning on one at a time, even though the loan costs you a lot. But you should only strike if you still intend to buy a TV after you have been paid.
When you shouldn’t borrow – example
- Your old computer starts to mess around and has become stale, so you are considering buying a new computer that costs USD 8000. You do not have USD 8000 so you are considering taking a quick loan that you pay back within 3 months. Honestly, in this case it is better to save together to the computer for two, three months instead, for so long you can safely wait. You will probably save USD 1500 – 2500 on this.
- In February, when winter begins to suck the must out of you, you want to go on a trip and think about paying it off with a private loan or fast loan. Ignore it and start saving money for February next year, no matter how boring it sounds, because that winter is sure to be as tough as this one and then you won’t have to borrow money for a trip next year. In addition, you can travel more if you buy your own money.
Three tips to avoid unnecessary loans
Save money for future purchases
Even if it is not something you want to buy at the moment, it will always turn up something you want. Therefore, be sure to save money on a monthly basis, maybe a few thousand a month if you can. The day a swine cheap last minute trip or a really good deal on a new computer pops up, you won’t have to take out a loan and be able to withdraw money from the account instead, and it will feel much better, we promise .
Save money for an emergency buffer
These buffer money should you have in a separate savings account and should only be used for boring expenses that can appear, for example if the car needs to be repaired or the hot air pump breaks. Unfortunately, if you have a buffer and things like that, you may be forced to take out a loan instead.
Be insured against loss of income
If you earn well and your A-cash would not at all give you 80% in compensation if you become unemployed, it is good to have an income insurance that guarantees that you will receive 80% in compensation during the first 100 – 180 days. There are too many people who do not have an income insurance and are therefore forced to take out a loan to be able to provide for themselves. If you join a trade union, an income insurance is usually included and there you can also get an extra health insurance that provides better compensation if you become sick for a longer period.
If you want more hands-on tips to help you avoid loans and debts, read our articles on how to get a more stable economy and how to avoid debt.