When it comes to credit, it often seems like there are two extremes. Some people seem to feel like you should use credit to get everything and anything you want, while others seem to feel that you shouldn’t ever buy anything unless you have the cash on hand. Most will make exceptions for a mortgage or a car loan, but beyond that they feel that you shouldn’t take personal loans out to pay for anything. So, who’s right?
For most people, the right answer is somewhere in the middle. While no one would seriously argue that it’s a good idea to buy everything on payments, there are some items which most people realistically can’t afford without financing them. And, if you do need to finance something, a personal loan is usually a better way to go than in house financing, simply because the interest rates are typically better and it helps you build a good credit standing with the lender.
So, when you’re looking to buy a particular item, how should you determine whether or not you ought to take out a loan to finance it, or save your money until you can buy it outright? There are several questions you can ask yourself that should help you make the best decision for you.
In short, you should wait for most things, if you can. Saving first and then buying will save you a lot of money in interest. Not only that, but it will help you establish sound financial practices that can help you get ahead.
Photo via Ciaran McGuiggan