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Loans can be a useful tool for financing large purchases or covering unexpected expenses. However, there are some things that you should never take out a loan to buy. Here are six examples:
1. Luxury items: It’s tempting to use a loan to purchase luxury items like designer clothes, expensive jewelry, pieces of art etc. However, these items are often depreciating assets that will lose value over time. It’s usually not a good idea to take on debt to buy something that is likely to decrease in value.
2. Vacations: While a vacation can be a fun and relaxing break, it’s important to remember that it’s not a necessary expense. If you don’t have the money to pay for a vacation upfront, it’s probably best to save up for it or wait until you have the funds available.
3. Gambling: Gambling can be an addictive and risky activity, and taking out a loan to gamble is a particularly dangerous decision. Gambling loans often come with high interest rates and may lead to financial problems if you’re not able to pay them back.
4. Political donations: It’s important to be politically active and support causes you believe in, but taking out a loan to make a political donation is not a wise financial decision. Instead, consider making small, regular donations that you can afford.
5. Unnecessary medical procedures: While medical procedures can be necessary for your health and well-being, some procedures may not be medically necessary or may have risks that outweigh the potential benefits. It’s important to carefully weigh the pros and cons before taking out a loan to pay for a medical procedure.
6. A Car: Sometimes we try to convince ourselves that expenses such as cars are an asset and not a liability, but unless you are directly buying a vehicle for business, like starting a transport business, delivery, or an existing business needs it to up return on investment, then you are piling up your liabilities, and if you know your economics, the only thing worse than taking up more liabilities is taking one on a loan.
So before you buy a car, make sure you can actually afford it, it is one of those things you’d regret doing on a loan.
7. Home renovations: While home renovations can add value to your home, and on the surface it sounds like a good idea to take out a loan and enhance your living space, they can also be costly and may not always be necessary. Consider whether the renovation is truly necessary before taking out a loan. If you can help it, only undertake renovation projects on saved up money, this might even help you plan it out better, take time to plan and decide what you really need to fix, as you save up for the project little by little. It is never a good idea to borrow for this purpose, again, this a a depreciating expense, after a short while you will find yourself itching for another home renovation when the previous one didn’t put a dime in your pocket.
8. Business ventures: I can almost feel your gasp in disbelief at this one. Yes! starting a business can be a rewarding experience, but it is not worth taking on debt for. In business “all that can go wrong, may go wrong” so for this reason, you should think twice before going into into knee deep in debt, Consider alternative financing options, such as grants or investments, before taking out a loan.
In summary, it’s important to be cautious about taking out loans to finance purchases that are not necessary or that may not be in your best financial interests. Instead, try to save up for these types of expenses or consider alternatives that may be more affordable.
