What’s your stance on debt? It might be hard knowing where you stand when there are so many extreme opinions floating around on the Internet. If they all seem to contradict each other, cut them down the middle. You might just find an answer: there’s a time and place when borrowing money makes sense.



Let’s explore when you might consider taking out a loan, and when it’s better to save your money.

When Should You Consider A Loan?

According to Robert Kiyosaki, author of Rich Dad, Poor Dad, good debt buys assets. It helps you put money in your pocket or prevents you from wasting more money.

Put into practice, a loan or line of credit has the potential to solve a financial problem by helping you find your financial footing.

Here are some examples:

Property

Real estate is often touted as the best way to boost your wealth, but it’s hard to get a foot on the property ladder. It can be challenging, even if you’re looking in Tennessee, one of the cheapest states to buy a home.

The average house in the U.S. has a six-digit price tag, and few people have that kind of money hanging around.

Minor Car Accidents

Disaster strikes on the road somewhere in Tennessee, and you’re on the hook for the repairs following an accident. A minor collision may not be worth making a claim against your insurance, as it can cause your premiums to skyrocket.

If you don’t have savings to pay for unexpected repairs out-of-pocket, a line of credit might be a way to cover this unexpected emergency. You can put your emergency repairs on a line of credit online in Tennessee while insulating your insurance rates.

Education

Just like a home, a diploma may cost more than you can cover upfront on your own. However, it promises to increase your earning potential once you’re in the job pool. Taking out student loans, private personal loans, and lines of credit might be worth it.

Unexpected Home Repairs

As a homeowner, you should budget for ongoing repairs that keep your house in good shape. But sometimes a disaster happens, and it delivers a bigger bill than you anticipated, like when cold weather causes your pipes to burst, or your child throws a baseball through your window. Taking out online loans in Tennessee can help you fix these issues, keep you safe, prevent further damage, and retain the value of your home.

When should you rethink borrowing?

If good debt helps solve a financial problem, bad debt creates them. They become a liability that wastes money and limits your ability to grow your net worth.

By that definition, any loan has the potential to turn sour. You should only ever lock into a contract when you’re certain you can afford its monthly repayments.

But besides a loan’s expense, you should never borrow money for the following reasons:

• Buying designer clothes
• Financing a dream wedding
• Going on vacation
• Purchasing a pedigree dog
  
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What's The Difference?

Borrowing money might be a smart move if you can afford its monthly payments, and it helps you buy an asset or protect it from an emergency.

It might not be the right choice if you plan on using the money to purchase an unnecessary item you could postpone.Remember this distinction the next time you’re thinking about taking out a loan. Image Credits: luis_molinero via FreePik