Borrowing without a Specific Goal in Mind

When consumers get loans without a specific goal in mind they are basically asking for trouble. More often than not, loans or lines of a credit—without a specific goal in mind—almost always do more harm than good. When you borrow money for any reason or no reason at all, you are opening yourself up to various temptations and giving yourself opportunities to overspend. It’s something you should avoid doing whenever possible since many consumers tend to use various justifications in order to justify purchases they make.

“Why shouldn’t I treat myself?”

“It’s only a small piece of furniture... it’ll brighten up the room so much”.

“I haven’t made a purchase like this in a while, it’s overdue.”

These justifications help get us into trouble and we should avoid using them whenever possible!

Borrowing Money Because a Low Advertised Interest Rate

Anytime you see an advertisement that makes you think you need to take advantage of borrowing money because of a low APR, you are being fooled. If you don’t need the money it sure doesn’t make sense to pay interest to borrow it. You might think you’re taking advantage of a good deal but the simple truth of the matter is that those loans are costing you money in interest and anytime you pay interest for money you don’t really need it’s a waste of money.

Money Todays vs. Money in the Future

$1 today is always going to be worth more than $1 tomorrow. This is just the nature of money and all economic principles. Regardless of inflation or what, you would always rather have $1 today than wait to have $1 tomorrow (the same exact amount). Interest is what we pay to not have to wait for that money (for someone that is borrowing) and it’s always a means of satiating a lender and making it worth their while. Although many people would lend you money out of the goodness of their hearts, a for profit lender will not do that. They are in the business of making money and lenders get paid by how many loans they give out.

Needless Borrowing

Personal loans and credit cards are the two biggest culprits and perpetrators of needless of borrowing. These two forms of lending are most likely to cause people to needlessly spend money on interest payments than any other form of debt. The reasoning is simple, personal loans and credit cards can be used for any purpose at all. You don’t need to secure a home to your personal loan, you could use that loan to go on vacation. No matter how ill-advised a financial move it is, some people still choose to take on debt to travel.

Borrowing Money for a Specific Purpose

Whenever we borrow money we should always look to have a specific purpose in mind for the funds we are borrowing. It’s great to have funds available should a need arise but not at the cost of interest payments. This is all around just a bad trade off and one we should look to avoid altogether.