The 6 Main Reasons Behind Why People Borrow Money

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There are plenty of reasons why people decide to take the step of borrowing money. Whilst having to take loans out isn’t obviously as good as being able to cover the costs off your own back, it’s better than not being able to pay your bills and meet your financial obligations.

People sometimes borrow money to make a financial fresh start. If someone has picked up numerous loans along the way, they may opt to have it condensed into one big loan using new payday lenders – that way, they only need to pay one set of interest, there’s a lot less confusion over what’s what and what money is going where and it will look better to have one loan on your credit score than it will to have hordes of them all over the place.

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Recognising that you’ve gotten to a point in your life because you’ve made some bad decisions will make it much easier to move forward and to start making the right ones.

1. To get a roof over their head

Many people don’t even consider the fact that a mortgage is actually a loan which puts them in debt for many, many years. It’s one of the most important steps in anyone’s adult life and it’s also probably the biggest loan anyone ever actually agrees to. One of the best ways to ensure that your loan repayments aren’t as hefty as they need to be is to save for a good few years before taking out a mortgage – that way you will be able to put down a large sum of money for the deposit. Less money to pay back but it also means that you’ll get the best pick of the bunch as it’s well known that mortgage lenders reserve their best properties for those with weighty deposits and good credit scores.

2. For home improvement

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Phot source: Pexels

If only it were as simple as paying the agreed bills and that being everything. Just like unexpected problems pop up with cars meaning we should always try to have a reserve in case the engine gives up or a new exhaust needs fitting, it’s also good to save up for home improvement. But not everyone has an emergency fund and so when important maintenance needs carrying out, such as a boiler replacement in winter (absolutely essential if it’s broken) or a new washing machine, people turn to loans to get them through.

3. To get on the road

Quite a lot of people get into debt because they want to be on the roads driving. There tends to be a negative association with debts and loans and some people even look down on others for being in debt. But having a car on finance is exactly the same thing as you don’t technically own it until you’ve paid every single payment, therefore making it a long-term loan. The car industry is an extremely expensive one so it’s no surprise that people turn to finance or loans to get their car, insurance and MOT sorted.

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Photo source: Pexels

4. Debt is a better alternative for businesses

When it comes to raising enough money for a business, many decide that giving up equity is far too expensive and don’t want to lose out in the long run. A loan is for a period of time whereas equity will cost you a portion of your business forever.

5. They need help tiding them over until pay day

Living costs have risen over the years and it’s now more expensive than ever to get by. The problem is that whilst the cost of living in constantly on the up, pay increases are not. This financial crunch has affected people from every walk of life and it’s for this reason that payday loans have soared in popularity. They give desperate individuals the opportunity to borrow money until their payday so that they can meet financial obligations in the meantime. These sorts of loans can be expensive, so it’s important that you don’t use them as a staple part of your normal financial situation and that you don’t grow to rely on them. Also, do your research to make sure you’re getting the best deal.

6. Because they can’t tell their children no

Many families end up having to take out loans to pay the bills because they have spent beyond their means on their beloved little ones. It’s awfully hard to say no to a gorgeously cute face and every parent wants the absolute best for their children – even if they can’t really afford it.

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