Can Taking Out A Loan Be A Good Idea?

by Adam on July 6, 2012

Should You Take Out a Loan?

Ask any number of personal finance writers about taking out a loan and the most common answer is likely to be “No, don’t do it”. There are plenty of stories about people spending more than their income and resorting to loans to plug the gap. The stories hardly ever end well. The conclusion many come to is to avoid loans wherever possible. However, using loans can be a great way to achieve your goals -as long as you understand the consequences and weight up the benefits and costs.

Immediate cash for a reasonable price

Loans allow you to buy things with money you don’t have. For a price.  Some sites, like offer services for short-term lending, whilst others allow you to get a loan with a longer period of time to pay it back. The cost of loans leads some people to avoid them but that doesn’t automatically mean that loans are not worth considering. Whilst you could save money by simply delaying your purchase until you have saved enough income from other sources, you may deem the cost of the loan to be worth it as taking out the loan allows you to benefit from a purchase earlier. For example, saving up for a car will not help you in the short term if you need personal transport every day. Essentially a loan allows you to buy “time” -the time it would have taken you to save up for what you want.


Life doesn’t always go smoothly and sometimes people resort to loans to recover from emergencies that happen in people’s lives. It is wise to save for such emergencies so you do not have to resort to loans, because loans always have a cost. However, if the emergency demands it, a loan can be tremendously helpful and valuable, by helping move things along in the way that only money can. Ultimately people are more important than money so if the situation requires it- like buying a plane ticket to spend time with a dying family member- a loan can be worth its costs.


One of the most popular reasons to take out a loan is to cover the cost of an education. Using a loan for this purpose is a clear example of how to use loans to your advantage. For many of us it is impossible to fund an education early in life as we have not had a chance to earn enough to pay for it. Loans therefore give students the opportunity to develop their education which will then allow them, if things go to plan,  to earn enough later to pay back the loan and continue growing their earnings into the future.

In summary, whilst living beyond your means is definitely is not helpful to the pursuit of growing your pennies, loans can have a place in successful financial plans. Indeed, they do have a cost attached but if you take the time to assess the costs and the benefit for your situation and make an informed decision, then personal loans can be a useful tool for helping you achieve your goals.

Have you ever taken out a loan that you found helpful?

{ 1 comment… read it below or add one }


My mortgage my SLs and my DHs SLs have been very helpful. We bought a duplex (3 bedroom/1bath per aprtment) with a mortgage of $485/month. Rent for a one bedroom house was $575 with all utilities included. We spend about $170 in utilities/month average. This means for a 3 bedroom place we spend $655/month. Add in the repairs we spend $850ish/month. We have renters that pay $525/month bringing our expenses down to $325 then we have a roommate during the school year bring our expenses down to $125/month. We could not afforded our duplex without our SLs so I like those as well even though I pay about $60/month for those.

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