As a rule, financing most things is a bad idea. If you can pay cash, you save yourself interest charges, potential late fees, and even defaulting on the credit if something were to go wrong. Financing some things, especially those that lose value over time rather than gain it, is generally a bad idea.
However, not all financing is bad. Some things can actually make you money, or save you money in the long run, while other times financing something is just necessary for you to maintain your lifestyle.
Here are seven things you can finance that are actually a good idea.
Fairly often, home repairs are like dominos: not taking care of one means it will knock other ones over, causing a chain reaction of problems. Of course, this can be avoided by simply repairing the initial problem in a timely manner in the first place.
However, repairs can expensive, and you may not have the equity in your home or savings in the bank to cover them. This is when you may need to look at home repair financing options. Taking care of the initial problem will save you a lot of money in the long run.
A Business Startup
In the long run, starting a business will provide a better living and a better lifestyle for you and your family. However, the intimal cost of starting a business may be beyond your means. Although initially avoiding debt is the most desirable method of startup, often some debt is inevitable.
Because of the long-term payoff, borrowing money to get your business started, at least the right way, is usually a good idea. Be careful with this money though, and invest it wisely so that the business really will be able to pay back the loan.
Much like starting a business, education is about the long term. While taking out student loans is not an ideal, if you need to in order to finish your degree, it’s a good idea.
- There are some things to remember though:
- Don’t take out more loans than you need.
- Pay them back early if you can.
- Work in internships and other programs that help pay back your loans.
- Avoid gaps and taking time off from college that can trigger your loan payments to begin before you are ready.
Student debt can be mitigated so it is not a bad thing, but make sure that the payoff at the end of your degree is enough to start paying your loans back right away.
We have all been young and foolish, and acquired debt we should not have. Much of it might come with high interest rates and poor terms. When we are in these positions, sometimes it is better to get a consolidation loan to pay those debts off.
This can do two things: first, it impacts your credit score in a big way. While it might go down a few points at first, by the time you are finished with the process, your payments will be lower and your credit score will be higher.
The same works with student loans as well. Consolidation often comes with a lower interest rate, and the convenience that you just have to make your payment to one lender rather than several.
While it may seem crazy at first, most phone companies do not charge you interest when you finance phones through them. This means you are essentially getting free money for the time period (usually two years, but sometimes 30 months) that you are financing the phone.
There are also other programs, like the iPhone Upgrade Program through Apple that don’t charge you any interest over the life of a loan to purchase a phone. Using these programs is a good idea. It builds credit, and it keeps that extra money in your pocket.
Credit Card Rewards
While generally speaking credit card debt is a bad idea, sometimes you can use credit card rewards and offers to actually benefit you financially. To do this you need to stay on top of the payments, and preferably just pay the card off every month.
If you manage this well, the rewards can really pay off and be a great way to build you credit while getting you things like airline miles, hotel stays, free dinners, and even in some cases, cash.
Of course, one of the best investments is real estate and property. Since property value generally goes up, and usually well beyond any interest rate you are paying on a loan, in the long run it will make you more money.
Even in a poor market, you won’t lose money on real estate at the very least. Because of the way it retains value, borrowing to buy property, provided you do so wisely, is almost always a good idea.
Debt is generally a bad thing, but there are times when financing things makes sense. Take advantage of those times, build your credit, and avoid bad debt. Using common sense can keep you on the good side of borrowing.