SHOULD YOU NEVER BORROW?

1. Very often, well-earning bachelors believe in saving money in a disciplined manner, instead of borrowing it, to buy all things they need, and are convinced that loans and credit cards are traps created by banks, wondering why one should borrow at all.
2. While following this rule book of righteous elders, they point out instances where people have suffered because they have borrowed, and for them therefore, saving is setting aside hard-earned money for themselves but borrowing is using money that they have not earned.
3. However, this conservative reasoning may not always help in asset building due to a fundamental flaw in this thought process, because borrowing offers leverage benefits, which, if used judiciously, could turn out to be a smart way to build assets.
4. For instance, a home might be tough to buy by planning to fund it entirely with savings, because its price could increase abnormally during accumulation period, whereas institutional borrowing, with tax concessions thrown in, might result in a low-cost loan for acquiring an appreciating asset.
5. While needless loans, especially personal and lifestyle ones, should be avoided, it is useful to take those that can help in mitigating temporary requirements without much pain.
6. With credit rating of an individual playing a vital role in today’s financial life, it must be remembered that such needy loans can be accessed only with a good credit track record.
7. For this, a credit card with regular payments can provide adequate credit history to take a loan when really needed.
8. Therefore, possible benefits of meticulously borrowing reasonable amounts should be considered too, along with saving and investing, for fulfilling life goals.