4 Times To Take Out A Loan

Despite the modern prevalence of credit cards and buy-now-pay-later schemes, debt is generally not a good thing – and should be avoided if you have the choice. This is particularly the case when taking out loans. Most loans have high interest rates and none of the rewards you get with a credit card.

However, not all loans are bad. In fact, there are some instances where taking out a loan can be healthy and necessary. Just what are good times to take out a loan? Generally speaking, whenever a loan can be viewed as an investment. Sometimes a loan can help us to save money or even earn money in the future. Here are 4 examples of instances where a loan could be viewed as a healthy investment. 

Note: Some links in this post are affiliate links, which means I receive a commission if you click a link and then make a purchase.

Pixabay. CCO Licensed.

Starting a business

Starting a business could allow you to unlock a greater income. Unfortunately, many businesses have high startup costs. Launching an online store usually costs upwards of $1000, while opening a physical store can typically cost more than $50,000. Restaurants meanwhile cost upwards of $175,000 on average. 

A lot of budding entrepreneurs would never be able to launch a business if it weren’t for business loans. Angel investors and crowdfunding are two alternative solutions, however a loan often gets faster and more guaranteed results. The best place to take out a business loan from is usually a bank, however there can be some private lenders also worth trying. 

Pursuing higher education

Many higher paid jobs are only accessible by pursuing higher education. However, college fees can often be expensive – state residents at state colleges often spend more than $10,000 studying, while those going to out-of-state colleges or private colleges can spend more than $26,000.

Loans such as these HESC student loans can be key to affording college for many students. There are other options like sponsorships and saving up a college fund early, but generally speaking loans are the most convenient option for most people. 

Buying property

Nowadays, few people can get on the property ladder without taking out a home loan. Recent studies such as this one at Forbes suggest that the average home price in the US is currently $495,100. Even though certain homes and states have cheaper prices, it’s still rare to find a home valued at less than $100,000. Therefore, loans are essential for first-time buyers.

Property is a worthwhile investment. Over time, a property will gain equity, giving you access to money you wouldn’t have when renting. It’s worth taking the time to compare home loans, as well as looking into first time buyer incentive schemes (including low down payments and discounts). 

Reducing debt interest

Taking out a loan to pay off debt is generally not a good idea. However, there are some exceptions – such as when paying off a high interest loan with a low interest loan. 

Using a low interest loan to pay off a high interest loan could reduce the interest fees you spend in the future – saving you money. This is known as refinancing and worthwhile doing if you’re currently paying high interest rates. This guide explains more about refinancing loans. 

This is a contributed post.

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