7 reasons why people borrow money
Loans and credit form a cornerstone of many people’s personal finances. There are many different types of credit that you can get access to. Here are 7 reasons why people use loans and credit:
- To be able to drive: The motor industry is known for the sky high prices of cars as well as the car finance industry. If you need a car but you don’t have the cash on hand to buy a car, you can apply for a car finance loans. These tend to come from car finance companies. Car finance loans are expensive though so it is important to be in full-time and steady employment before you apply for a loan.
- To buy a house: Getting a mortgage is one of the most life changing moments in someone’s life. The ability to get on the property ladder is something that many Brits aspire to. If you want to buy a home, your best bet is to improve your personal finances and apply for a mortgage with a bank or building society that understands your needs well. You also need to save for a deposit which can take time, so it is important to start managing your credit profile well.
- For DIY: Personal loans used to be popular options for people who wanted to do extensions on their homes or renovations. Personal loans can be used for any personal reason as long as your lender approves of that.
- For their children: It can be hard to resist the temptation of getting your children something that they have wanted for a long time. The ideal way of doing this is by saving money yourself so that you can splash out on fab presents for Christmas for example, for your children. For other people who are crunched by cash, a small loan that is repaid on payday is an option or a cash advance.
- For Christmas: One of the most controversial sides of credit and loans is the fact that many people have taken out loans to finance the period. A study from the Money Advice Trust found that one in eight Britons struggle with spending after the Christmas period. The temptation to spend is everywhere from festive drinking and buying gifts from friends and family. You should try and save for Christmas gifts and Christmas spending to avoid snowballing into debt.
- To widen monthly budgets: Loans such as payday loans and money advances are by some people to help them tide over their bills before payday. Due to the financial crisis, the cash crunch has become real for many people in the UK. Payday loan usage has soared as the key way to help people sort out a few payments while they are waiting for their pay to come through. Relying on loans every month is not a good idea and payday loans and money advances should only be used in the short-term when a pressing financial need comes up.
- To save face from family and friends: Family and friends are two of the most common sources of cash for many people especially when times are hard. When you borrow money from a family member or a friend, you instantly change the dynamic of a relationship especially if you find that you cannot repay the money back on time. This is another key reason why many people turn to loans and credit to help them out with their financial problems instead of asking to borrow money from family and friends. Ultimately, borrowing from a responsible lender is better than putting your relationships with family and friends under strain.
The importance of having a job when borrowing
New changes in legislation in the UK have changed how the consumer finance industry looks now. It’s really important for consumers to only contact responsible lenders who have their best interests at heart. This means only choose lenders who are responsible. Responsible lenders can easily be noted by the fact that they only lend to people who are in full-time monthly employment. You need a steady income that is predictable at the end of each month in order to qualify for short term loans and money advances.
The importance of borrowing for the right reasons
Try and avoid borrowing money from friends or family for short-term needs such as buying Christmas presents or going shopping. It’s important to get into the habit of saving your money for these occasions so when they come around, you can instantly buy what you want. Borrowing from the right reasons also includes not borrowing from friends and family for a short-term requirement. You might feel worried and stressed about cash and this may cause you to reach out to friends and family. Do this only if it is a complete and total emergency – there are plenty of professional consumer finance options available that can help you.
Know the impact of borrowing money
The impact of borrowing money can be strong on all aspects of your life from your personal finances, your personal life and your health. Studies have proven the link between stress, health and money problems. It’s really important to make sure that you take care of yourself when you borrow money. Don’t overboard with borrowing money if you have many outgoings that you need to take care of. The impact can be tough and it can create havoc on your personal life by causing you to think about money all the time. You can mitigate this pressure by creating a specific plan for borrowing money and ensuring that you pay it back on time.
Final top tips to follow for loans & credit
- Know the dates of your loan repayments: For example, if you have a payday loan or a cash advance, be aware that at the end of the month, you need to repay the loan.
- Write a detailed spending diary: A spending diary will help you to see how you spend money. Normally spending on excessive luxuries such as daily coffees can be curbed and funnelled into repaying debts.
With this report, understanding the impact of loans and credit is instantly made easier for the majority of borrowers who are looking to cash advances and payday loans as options for credit. As long as you are in fulltime employment and you know why you are borrowing money, borrowing from a responsible lender is straight forward.