We are pretty sure that you have heard about good loans and bad loans. Both of them do exist – no matter how skeptical you may be. The thing that makes it good or bad is how we use it in our lives.
It is interesting to note that the role of debt in society have changed over time. In the past, debt was not the norm. In fact, when you say that you have debt, it reflects badly on you. However, the emergence of credit cards made being in debt okay for a lot of people. At least, this is true before the Great Recession. It became the norm in society and was even a sort of status symbol. If you bought using your credit cards, that reflected a life of affluence – somehow.
According to an article published on IndexCreditCards.com, there is a significant change in how people are borrowing money – especially when you analyze the different age groups. In this country, anyone who is aged 20 and above are sure to be in debt. Not just debt, but they usually have a lot of it. This is especially true for those who are 50 years and older. They comprise almost half of the indebted population. This is surprising because these are the people who are about to retire. They should be heading into retirement without debt because very soon, they will be losing their ability to pay them back. Unless these people choose to work until they drop, debt will surely ruin retirement for them.
It is clear that the change in borrowing habits seem to have shifted. You would think that the younger ones would be braver when it comes to borrowing because they have all the time in the world. They do not have any responsibilities yet and they can still take risks when it comes to debt. However, that is not the case. The younger ones are more timid when it comes to borrowing money. The elder ones, the ones who should be cautious, have more debt.
This piece of information shows us that borrowing is bound to change from time to time but that does not mean you should be careless – or completely afraid of it. As long as you understand how to borrow wisely, you should not worry about debt at all.
Some options to borrow money wisely
Robert Kiyosaki, a successful businessman and motivational speaker, encourages people not to be afraid of debt. In his website, RichDad.com, he said that debt can be used as a tool to make you wealthier – as long as it is a good debt. He defines a good debt as borrowing money so you can increase your wealth.
So if there is ever a time when you need to borrow money, do not be afraid to do so. You just have to know the right options for you and how to borrow from them wisely.
In all honesty, the options that are provided here are sometimes the very things that financial experts will warn you about. But while they may have negative implications, there are also good ones. In fact, all options for borrowing money have their pros and cons. You just need to understand them to figure out which option will work best for you.
Here are some options that you can look into.
- 0% credit cards. Now you would not think that credit cards are a part of your options – but it can be. These 0% credit cards can be used for debt. It is 0% because you will not be charged with interest – at least for a couple of months. So if you want to be wise about this debt, makes sure that you have a payment plan in place before you borrow money. And make sure that you can pay of the debt before the 0% offer expires.
- Retirement fund. Ideally, this is your money so borrowing from it . However, there are so many things that you need to know about borrowing money from your retirement. There will be implications about your taxes. But then again, when you pay this back, you will be paying interest to yourself. Although that interest is not too big, you will profit from this transaction – and not some bank. To be wise about this, you need to borrow only what you need and again, make this as one of your last resorts. And, make sure you pay it back – otherwise, it is your future self that will suffer the consequences.
- Family loans. Borrowing from family or friends is usually a bad idea for the sole purpose of putting your relationship with them on the line. Suze Orman, in an article published on Oprah.com said that lending a loved one some money can actually hurt more than it can help. However, it can work for you as long as you know how to go about it. The key is to make everything legal and to make sure that you will follow through with your payments. Just because they are a close family relative or a friend, you need to keep in mind that whatever you borrowed from them was hard earned money. Respect that and the person who lent you money and you should have the motivation to pay them back.
There are certain debts that you need to stay away from as borrowing money from these sources will really do you no good. These include making cash advances from high interest credit cards or borrowing from payday loans. Research your options before you commit. That is how you become wise when it comes to debt.
Important reminders after getting your loan
To be wise with your money means you should be mindful of your debt. It does not have to be debt elimination – you just have to understand how debt is to be dealt with.
Here are three important reminders for those of you who wish to borrow money – for whatever reason.
Make sure it is used as intended
If you intended to use the money to invest or to purchase something that will help grow your wealth, make sure it is used for that purpose only. Do not use it for travel or to buy something else. Use every penny for the purpose that you borrowed it for. That way, you will only have to loan the amount that you really need – no more and no less.
Have a payment plan in place
Even before you choose the source of credit, you need to have a payment plan in place – even if it is just a rough draft. This will help you determine how much money you can afford to pay back. Use that as the reference for borrowing money and leverage it with the amount that you really need. Once you have finalized how you will borrow money, only then can you create your payment plan. Make sure it is a realistic plan – something that you can commit to.
Integrate that payment plan in your budget plan
After finalizing your payment plan, the next thing you should do is to integrate it to your budget plan. If you do not have a budget plan, create one. Aligning your payment plan with your budget plan is one way to guarantee that you will allot funds to meet your payments. Forgetting about your debt payments is one of the things that you should avoid.