It’s a fact of life that often, we don’t have the funds available to get the things we really need. Saving is always the best port of call, but some may wish to use loans to cover the cost. Many do, in fact – according to The Money Charity, the average total debt per UK household in April 2021 was £61,509.
This is a big figure, and indeed loans should never be used for frivolous spending as the risk of falling into a cycle of debt is very real. However, there are some good reasons why a person might want to use one – sensibly and smartly, and sure they are able to pay back the amount borrowed.
Short-term loans can come in handy if you need a lump sum of money to quickly pay for emergency expenses. This might include needing to fix a faulty boiler, remove suspected asbestos in your loft, or take your car to the workshop for repairs after it has broken down. These sorts of expenses are crucial to your health and job, so taking on a safe amount of debt can be a fair way to pay for them if you lack emergency funds or savings.
Combining debt balances
If you have multiple credit cards but their terms are expensive, paying these off with a cheaper loan via debt consolidation can simplify your situation. This can reduce the number of forms of credit you need to pay back, lower the interest rate paid on the debt overall, and increase the amount of time you have to pay it back – especially useful if the loan comes with an interest-free period.
Making big changes to your home is expensive. So, if you are in a position to borrow against your home by via a home equity line of credit or an extension to your mortgage, these sorts of loans can help pay for improvements that would otherwise be postponed for years if the equivalent amount needed to be saved.
Large life events
Weddings, funerals, moving house – there are lots of big, expensive events in life that require funding. If these happen suddenly or can’t be put off, then funding them with a loan can be a good idea. Just make sure that you can afford whatever you borrow and scrutinise whether you really need to borrow the amount you think you need, or even if you need to borrow at all.
Have you smartly used a loan to pay for something important? How would you recommend others safely use loans to finance the really important things in life? Let us know your thoughts in the comments section below.