There are many people that have savings and take out a loan or who take out a loan without thinking about whether they should be saving up. It is good to have a think about which of the options is best as there are reasons for picking both and it is wise to make the right choice for you.
By saving up money you will not be paying out anything extra to buy the item that you want. In fact, if you put money by into a savings account, then it could be earning interest and you will actually be gaining money. There can be a lot of pleasure in putting some money by each week or month and knowing that it is going to be spent on something that will give you a lot of pleasure. Once you buy the item you can feel really proud at how hard you worked to save the money to buy for it. You will really appreciate it as well and you will probably look after it better too.
While you are saving up the money you may even change your mind about buying the item. This might be because you no longer want it or perhaps because you think it is too much hard work and therefore too expensive. This is a good thing because it shows whether you can do without the item or whether you really want it. Sometimes it can be really hard parting with that money that you have worked so hard to save. Having it there feels like more of an achievement than buying the item that you really want.
It can feel really hard to save money. It is worth remembering though that if you get a loan you will have to make regular repayments. If you take the amount that these repayments would be and set up a direct debit to put them into a savings account you will not be spending any more money but you will not have to get a loan. You may be tempted to take money out of the savings account and spend it on other things and if you need it for an emergency then this could be really handy and something you would not have available to you, should you go with the option of taking out a loan.
Obviously there is a cost associated with borrowing money which you can avoid if you save up. However, if you need an item really quickly then you may not have the option of saving up, although if you have savings already then you could use those instead. You may also need to borrow a really large amount of money, perhaps to buy a property and then you will take a very long time to save up and it just may not be worth waiting. You will find that as you save the property prices will rise and you may never be able to get together enough money to buy anything. By borrowing for a property purchase you will also save money on rent and so this will help you to be better off and more easily afford the mortgage payments which could therefore be a lot higher than the amount that you are able to save each month. Borrowing for something like a university course could also be worth doing, rather than waiting to save up as you could be a in a better paid job sooner and therefore benefit from having more money.
It is really important if you are considering borrowing
money to not only make yourself aware of the costs but also to ensure that you
can afford the repayments. You should be able to find out how much these will
be if you ask the lender and then you will be able to take a look at your
finances to see whether you feel they will be affordable. It is worth
remembering that if your loan has a variable rate of interest then your payment
could increase if the prime rate goes up and so you will need to be confident
that you could still afford them in this situation. Choosing
Whether saving or borrowing is best for you will very much depend on what you want the money for and how much you need. It is always worth considering the saving option though because if what you want is not urgent you will save a lot of money this way. It is wise to look at the costs of borrowing and how much the repayments will be as that will help your decision. If it looks too much to handle or too expensive then it will be a good idea to avoid borrowing. If you need money quickly or lots of it then borrowing could be a good option. Try not to think of one as good and one as bad but just that you are looking for the right solution for you.