It’s very hard to go through life without borrowing money. In fact, loans can sometimes be necessary for making important investments such as buying a house, starting a business or pursuing higher education.
That said, there are other times in life when loans are not necessary. In fact, in some situations, loans could cause much more financial damage than they are worth. Below are just some of these instances where you should never borrow money if you can help it.
We would caveat the below with the fact that we aren’t professional financial advisors. If you are looking to borrow money, always be sure to do your research on payments and interest rates, and be sure you can afford any repayments.
Gambling is probably the worst thing that you can borrow money for. If you gamble a large sum of money and lose it, you’ll then have to pay it back and you’ll have absolutely nothing to show for it. Of course, there is a chance that you can win back money, but statistically speaking most gamblers lose more than they win.
Already accumulated gambling debts? There are companies that can help with gambling debt, helping you to pay off any loans that you may have. Make sure that you quit gambling the moment you start to accumulate debts – don’t try to win back the money you own, as you may just lose more.
You should also never borrow money for alcohol or drugs. Once you’ve crossed this line, it’s usually a sign that you’ve become addicted. Of course, in our eyes drugs are an absolute no no, so we wouldn’t recommend taking them, never mind borrowing money to buy them.
Challenge yourself to take a break from these substances if they’re getting you into financial trouble. It will not only help you to pay off your debts, but could give your body the break it needs.
Luxuries you can save up for
Luxuries are things in life that bring us joy, but aren’t essential. They include things like designer clothes, fancy gadgets and holidays.
If you can buy these items with a loan, it usually means that you have the capacity to save up for them. Instead of paying back for those luxuries in instalments, you could be setting aside that same amount of money in savings.
People are more likely to regret spending money on luxuries when borrowing money for them because of the subsequent payments. When you save up for luxuries, you can enjoy them guilt-free (plus you’ll save money in interest fees).
Borrowing on behalf of friends and family
If a friend or family member asks you to take out a loan for them, simply don’t! If they can’t pay you back, you’ll be left with the debt and it will be in your name. It could damage your credit score if you can’t pay it back on time – and you won’t be getting anything out of it.
Coerced debt could actually be a form of financial abuse, which may be possible to seek legal support for, although it’s very difficult to prove. Your best defence against this type of debt is to simply put your foot down and not take out loans for others (and don’t give them access to your credit card).
Taking out debts to pay off other debts is very dangerous as it often means taking on extra interest fees. This can result in a debt spiral in which you keep taking out bigger loans to pay off existing debts until you can no longer take out a debt big enough.
Only take out debts to pay off other debts if you’re consolidating debt or paying off a high interest loan with a low interest loan.
Got Something to Add?
Share your tips for borrowing or not borrowing in the comments section below.
Until next time, thanks for reading.
Helen, Nial, Lewis and Mason.