5 Common Reasons People Borrow Money

Personal financial motivation is highly individualised. Some household cash handlers are tuned-in to long-term saving strategies, while others are preoccupied with keeping up with the latest spending trends. Whichever category you fall into, or if your finance habits lie somewhere between the two extremes, you’ll no doubt find good reasons to borrow money during your lifetime.

From mortgages to credit cards, consumers use many different types of loans to manage their financial needs. Though each borrower has a unique spending plan, the following examples represent some of the common reasons people borrow money.

Stretch Monthly Budgets

Cash flow isn’t always even, so some months may not provide enough income to cover your outgoings. If you’re like many other British borrowers, a short-term loan is occasionally needed to cover monthly budget shortfalls. As long as you have a job, you can use your paycheck to qualify for no-credit-check loans, issued by various lenders. Web resources make it easy to evaluate rates and terms, making side-by-side comparisons, so you know you’re getting the most affordable loan.

If budget woes occur month after month, you may need to devise a permanent solution. Cutting costs and increasing income are two effective strategies for eliminating cash flow problems. If you are unable to solve your ongoing budget problem with a single method, try reducing your monthly outgoings and adding another source of income.

DIY Projects and House Updates

Your house is an important investment, so making repairs and keeping up with maintenance are worthwhile ways to spend your time and money. A loan can help fund DIY projects and pay contractors to make improvements to your residential property. In addition to keeping you comfortable, renovations can add value to your house.

Equity financing uses your house as collateral, so the terms and interest rates on this type of funding are favorable, when compared to some alternatives. A personal loan is another reasonable source of financing for conducting home improvements. If you select an instalment loan, you’ll always know how much is owed each month and you can plan your finances around a set repayment schedule.

Holidays and Travel

Spending peaks for many UK families during the festive season surrounding Christmas. Entertaining, meals out, and seasonal presents all add spending pressure in November and December, so UK consumers frequently turn to outside funding sources during this time of year.
Summer travel presents another spending challenge for holidaymakers eager to take advantage of school recess for family travel. Credit cards are convenient for tackling expenses while on holiday, but building large balances can leave you repaying the debt all year. If you can manage, saving money before you travel helps keep financing costs as low as possible.

If you do need to borrow money for travel, personal loans and other forms of funding are available, with lower interest rates than credit cards. To settle on the best source of cash for your next holiday, determine how much money is required, how long it will be before you can repay the loan, and how quickly you need the funds. Analysing these three criteria can help you identify the best type of loan for your circumstances.

Family Obligations

Children bring joy to families across the UK, but youngsters also add expenses. Although it is money well spent, the cash you need to raise kids isn’t always on hand when you need it. When family financial responsibilities call for outside help, various types of loans help bridge cash flow shortfalls. Whether your child needs new clothes, a transport pass, or money for university, a short- or long-term loan provides access to the cash you need to meet these family financial obligations.

Motoring Expenses

The price you pay for a car is the first of many expenses paid to keep you on the road. Insurance cover, maintenance, repairs, petrol, and a series of additional costs can quickly wipe your motoring budget. Loans help people keep up with these expenses, when money isn’t available to cover the costs.

Working out a motoring budget can help you manage expenses, over time, but car costs aren’t always timely. Unexpected repair bills, insurance rate increases, and parking fees sometimes arise when money’s short. And when your car comes to the end of its useful life, investing in a replacement often requires help from a lender. In addition to car finance, some motoring expenses can be covered using personal loans and other types of credit.

No matter what your financial priorities are, loans and revolving credit can help you meet monetary obligations. These 5 examples are some of the most common reasons people seek financing, but your own experience may include additional borrowing needs. When you require cash, exploring all your credit options can help you select the most affordable source of financing and effectively manage your debts.

Paul graduated in 2001 with a degree in Finance. Since then he has gone on to work for several of the UK's most well-known financial institutions.

An avid blogger and a huge football fan, Paul is here to guide you through the ins and outs of personal finance and perhaps save you some money in the process!

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