When It Makes Sense to Borrow Money

It is generally in your best interest to accumulate as little debt as possible. However, there are times when borrowing money may make it possible to get ahead in your career, improve the value of an asset or increase your net worth. 

A College Education Can Increase Your Earning Potential

If you attend a public in-state school, you can expect to pay $38,748 over the course of four years. However, obtaining a college degree can increase your earning potential by as much as $32,000 per year. If you are a full-time student, it may be possible to defer payments on your student loans until six months after you graduate.

Don’t Deplete Your Savings to Buy a Car

Let’s say that you have $10,000 in a savings account that can be used to purchase either a car or shares of an index fund. It’s a good idea to invest that money into the index fund and borrow money to purchase the car. This is because the interest rate on a car loan is much lower than the rate of return on your investment. 

Debt Consolidation Loans Can Help You Save Money

It isn’t uncommon for credit card companies to attract new customers by offering 0% interest for up to 24 months. If you have existing credit card debt, transferring those balances to a new card can significantly reduce your monthly payments and make it easier to pay off those balances in a timely manner. 

Borrowing Money to Improve Your Home Can Be a Smart Move

If you are planning on remodeling or furnishing your home, it may be a good idea to finance the cost of doing so. Paying for a stove, couch or television over time may allow you to spend more on a quality product that will last for many years to come. Taking out a loan to remodel a kitchen or bathroom often makes sense because upgrading these spaces can significantly increase your home’s market value. Therefore, you’ll likely be able to recoup your money when it comes time to sell the property.

Ideally, you’ll only borrow money that you can afford to repay in a reasonable amount of time. A loan calculator may be able to help you determine the total cost of borrowing money before agreeing to take any funds from a financial institution, friend or any other lender.