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Understanding Debt: WHEN IT’S OK TO BORROW

Published: 
Sunday, July 16, 2017
BEYOND PAYDAY

At some point in our lives most of us will be confronted with the need to borrow. The critical issue with borrowing is not the debt itself, but the purpose for which the debt is incurred. “Good debt”, generally speaking, is an investment that has long-term value - value in terms of usefulness and income generation. Debt can actually be a valuable tool if properly acquired and successfully managed. Here are a few situations where it’s ok to borrow

To Buy A Vehicle
For many people, cars are an integral part of their job and provide safe and comfortable transportation for themselves and their families. Borrowing to provide that level of utility, safety and comfort is typically a reasonable debt to incur. Additionally, some vehicles can be used for income generation (think maxi-taxis or trucks), so borrowing for this purpose is perfectly wholesome.

To Buy A House
For most of us, owning a home would not be possible if we weren’t allowed to borrow, and for most people, a house will be the largest asset they acquire and biggest personal expense they incur. Home ownership in fact, remains a goal to which many aspire and one day hope to accomplish. Borrowing to purchase a house is among the wisest borrowing we can do. Generally speaking - but not always - property prices tend to rise with the passage of time, making the borrowing worthwhile. Also, borrowing for property development purposes such as for renovation, to rent or to lease out is also fair, given the income generating capability associated with such an investment.

To Cover Medical Expenses
As much as we take good care of ourselves and avoid elements dangerous to our health, we all remain susceptible to medical misfortune. For many of us, having appropriate insurance coverage can buttress the effects of health-related issues. Still, because of varying circumstances it may be necessary to borrow to cover certain medical expenses. Borrowing for our health could sometimes mean the difference between life and death.

To Pay For Your Education
Though subsidized in T&T by some measure, funding one’s academic pursuits sometimes requires some measure of borrowing. Truthfully, there is never really a downside to becoming more educated. The returns on a solid education in the long-run usually pale in comparison to the short-term costs associated with acquiring it. Borrowing to invest in oneself nonetheless tends to be the greatest investment we can make.

Debt Considerations
It must be stated though, that before signing up for any new or additional loans, there are several considerations that need to be made. Here’s a quick list of questions an individual should ask himself before deciding to borrow.
1) Given my current circumstances in life,
can I afford any debt?
2) How much will I have to pay back in interest?
3) What are my borrowing options?
4) How long will this loan last?

Well thought out answers to these questions is vital before an individual decides to take on debt. Setting aside the time to think these questions through is critical to making the right borrowing choice. Ultimately, borrowing when done correctly and for the right reason can make a big difference in helping us survive beyond payday.

COMING NEXT WEEK
Beware of Impulse Buying:
A Subtle but Deadly Expense.

ANDRE WORRELL