We need to borrow money for many reasons. Mostly, we borrow to:
- Respond to an emergency; or
- Consume (purchase an item for which we do not have enough money at the time of purchase).
A loan provides you with a lump sum of money that might be difficult to obtain otherwise. It enables you to take advantage of business opportunities, respond to emergencies, make home repairs or purchase something you need. But borrowing money can be expensive and carries obligations to repay on time. For these reasons, taking a loan is not the same as using your own money that you may have through wages, business profits or savings. The chart below outlines the advantages and disadvantages of taking a loan.
|Taking a Loan||Using Your Own Money|