Advantages of Financing Large Purchases

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Asking someone to spend $1,000, $10,000 or $100,000 on a single person may cause that individual to faint or otherwise become overwhelmed. However, financing that purchase may make it easier to afford it as an individual only has to make small payments over time. In some cases, a person who borrows money may be able to pay the loan off before the end of the its term.

You Can Leverage Your Existing Assets

If you have equity in a home or any other asset, you may be able to tap into that equity without actually selling the asset. Instead, the lender will put a lien on the property used to secure the loan until it is repaid. However, since you still own it, it is yours to sell or to keep as it continues to appreciate in value. Depending on how fast the property appreciates or how much revenue it creates, it may be possible to repay the loan without having to use any of your savings or other actual financial reserves.

You Don’t Necessarily Pay Full Price for the Item

Assuming that you have equity in your vehicle, home or whatever else you borrowed money to buy, you could flip it for another asset and use the equity to pay for it. In other words, if you owed $10,000 on a car that was worth $15,000, you could use the extra $5,000 on a down payment for another vehicle. Therefore, that $20,000 vehicle now becomes $15,000, and you could theoretically flip it again before you fully pay it down, which means you have effectively owned and operated the vehicle without paying anywhere near the $20,000 that it cost.

Keep Your Money in the Stock Market

If you have money in the stock market or in other appreciating assets, you will want to keep your money there for as long as possible. By borrowing $200,000 to buy a house instead of using money currently available to you, it ensures that your portfolio continues to grow at an exponential rate. Assuming a 7 percent return each year over a 30-year mortgage, the $200,000 you would have spent on the home could be worth more than $1 million. That is significantly more than the amount you will pay for the home with interest and other fees.

Improve Your Lifestyle Now

You don’t want to wait 30 years to save up the money it would take to buy a home. In most cases, this would force you to either live with your family or friends without paying rent or throwing your money away each month by paying rent instead of building equity in a home. Instead of choosing whether to strain your relationships or your finances, you can take out a loan and buy a home that you want at a price that you can afford. Depending on where and when you buy, it could be cheaper than renting even after taking taxes and interest into account.

There Are Many Financing Options Available

The good news for those looking to finance a large purchase is that there are many loan products available. For instance, you could use car title loans to borrow against the value of your car. They are perfect for those who have poor or no credit and can repay the money within 30 days.

Other loan products include personal loans, credit cards and home equity loans that are designed for those with good credit who want flexible loan terms and low interest rates. These options give you the ability to keep your monthly payments to a minimum, which may give you the flexibility to save for retirement or take a vacation without straining your bank account.

Having the ability to make a big purchase makes it easier to meet your needs today while improving your lifestyle for the future. Knowing that you have a decent car to get to work in, a decent house to raise your kids in or generally having assets that can appreciate in value means that you can work on building a stable future for yourself and your family.