Just about everyone has borrowed money at some point in their lives. Even as kids, we probably borrowed some money, but back then, it was probably simple and innocent. However, as we get older, things start happening in our lives.
We try to better ourselves. Sometimes, this may mean we have to borrow money from loans or credit cards or other alternatives. It may also be from a friend, relative or a financial institution.
Let’s take a look at seven of the most common reasons to borrow money.
1. To Start A Business
Many people all over the world have started, or intend to start their own business. When you know a certain industry and you have certain qualifications, sometimes, you want to start your own business. They may have also gained experience working in their field before deciding to go it alone. However, starting a business requires money.
Depending on what kind of business it is, it could require a huge capital. Unless someone was born into a rich family, you are going to have to come up with cash; cash you do not have. So, people borrow money in order to be their own boss. Starting a business is probably one of the most common reasons to borrow money.
2. Buying A House
Buying a house (or some other form of property) is arguably one of the top reasons to borrow money. Buying a house can actually increase your net worth. There is something very special about buying your own home. It fills you with pride. You feel like you’ve ‘arrived’. It is also your place.
You can choose to do whatever you want to it to make it look and feel more special. At the end of the day, it’s yours. When you pay $15,000 in rent a year for 10 years, that’s $150,000 you will never see again! When you buy a house, you will have to go in debt. You will need to borrow money, unless your name happens to be David Beckham.
3. Paying For School
Wouldn’t it be nice if education was free? In a perfect world, eh? Unfortunately, the higher you go, the more expensive it gets, doesn’t it? Well, one could always choose to drop out and save a lot of money! Yes, we’re kidding, so stay in school! Paying for school is really an investment in yourself, isn’t it?
Later on, when you develop an interest in a certain field, you can try to specialize in it. Yes, it will be expensive but it is the kind of debt you can also feel hopeful about. In the end, when you qualify and get a good job, you would repay this debt many times over.
4. A Wedding
Weddings are big business. Planning them leads to one of the most common reasons to borrow money. They cost a lot, which means large expenses for the couple in question, or, for the person who pays for it all, like a parent. Even if you were to buy an engagement ring, this can easily cost a few months’ salary (now that Honest Ed’s is closed). Seriously, there are so many things associated with a wedding, before and after. We are talking spending thousands of dollars. People take out personal loans because of a wedding. Be smart and stay single.
5. Funeral Expenses
Nobody likes to talk about this. Some don’t even think about it. Unfortunately, nobody escapes when our number is called. When someone passes, there is the funeral to arrange. Believe it or not, this can be incredibly expensive. The services of a funeral home can add up to thousands of dollars, even if you try to reduce the costs.
Sometimes, the deceased person has already made prior arrangements, in which case, they may have taken a loan. If not, a family member (or members) may have to get together to take care of it. Unless they have funds available, they may have to borrow money to send off their loved one.
6. Buying A Vehicle
Most people don’t walk around with $10,000 hanging from their pocket. While some people take out a loan to buy an RV or a boat, in general, the most popular purchase is a car. Even motorcycles can be pretty expensive. Buying a car is one of the most popular reasons to borrow money.
7. Paying Credit Cards
Credit cards have high interest. Many people borrow money or take out a loan to help pay off their credit card. This way, they have less interest to pay. You can also consolidate debt if you have multiple loans or credit cards. This can make it less overwhelming, since you only have one monthly payment.
People also borrow money for making home renovations or for business-related purposes. A new roof, or kitchen and bathroom renovations can be costly. Sometimes, businesses need to buy new equipment or do renovations to expand their business. Sometimes, these things cannot be avoided. If they don’t have the money, they will have to borrow it. A business can recoup this, while home renovations can increase the value of the home.