Good Reasons to Borrow Money
While the growth in personal debt in Canada has seemed to slow, the amount of our disposable income we use to pay interest has stayed about the same. With interest rates expected to increase in the second half of the year, the percentage of disposable income needed to service personal debt will start to grow. For many consumers interest rate increases will be what puts them over the edge. With all the debt we do carry when is it a good idea to borrow and when isn’t it?
Generally speaking, it is good to borrow for items that will increase or appreciate in value, improve your ability to earn a higher income or improve your net worth. So the best reasons to borrow are for:
- a home
- education
- retirement
- to start a business
- emergency funds
- to pay off higher interest rate debt
- a car - but use savings or a combination of savings and a loan if the loan rate is greater than your savings rate.
If there are good reasons to borrow there are also bad reasons to borrow as well. It is never a good idea to borrow for everyday expenses, luxury or for funding a lifestyle beyond your means. Very quickly this type of spending can spiral out of control and making monthly payments becomes more and more difficult.
If you are thinking of borrowing come in and talk to us. Your financial advocate can help you figure out if borrowing makes the most sense for you and your financial health.
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