Get a Loan - How and when do I take ?

We often think that the problems arising from misuse of credit is a result exclusively of the realities of contemporary society. However, history shows that, for thousands of years, man has been having problems with sound credit management. In many cultures, ancient and contemporary, credit and "borrow" have come to be regarded as negative and not recommended.

This little historical reflection leads us to ask ourselves the following questions: Is it really bad to use the credit ("borrow")? How and when should I use this financial facility?

The answer to the first question can be fairly straightforward and simple: borrow money is not something that should be considered absolutely bad or negative. It is rather the misuse or abuse of this credit facility, which usually produces unintended consequences. The answer to the second question deserves an explanation of some key concepts that will help us arrive at specific recommendations.

The first concept we need to understand is the difference between borrowing to invest and borrow to consume. Debts for investment are those that using the funds to purchase goods that have the potential to maintain or increase its value over the long-term, or have the potential to produce income over time. For example: real estate loans, loans to install your own businesses and education credits. While the consumer debts are those that use the funds to acquire assets that lose value over time and do not have the potential to produce income, among these may include loans for vacation, cars, clothes, among other things.

The second concept we need to understand is the difference between good debt and bad debt. Some financial advisers say the position that any debt for investment is good and that all consumer debt is bad. This position is to be an absolute low, especially for Latin American countries for example, where the level of average family income is lower and therefore there are many commodities that are bought more often, through access to credit (e.g. A vehicle, basic household appliances, a computer for children, among others). In this regard, which will determine whether a consumer loan can be considered good or bad are the characteristics of the items we acquire. If it comes to items that can be considered a basic necessity and not a mere wish or luxury, then you justify qualify for get a loan to buy them. If you need to into debt to purchase items that are not a basic need (e.g. a luxury car, fancy vacation, designer dress for your wife, among other things), then it is very likely that you're trying to bring a standard of living than you can really afford. To this, the fact is that the interest rates paid on loans by which you can buy these items are generally much higher than those offered to buy a house, college, or acquire a front need.

Practice

- We should get a loan only after analyzing our financial situation and have concluded that we will be able to meet the principal and interest payments required. This analysis should be as realistic as possible.

- Investment loans (real estate, education, business) loans can be considered healthy. This type of loan can be taken long-term and generally offer attractive interest rates.

- Consumer loans for items that are basic necessities can be considered good loans. This type of loan should be taken as soon as possible.

- Consumer loans for items that are not a basic need loans can be considered "unhealthy." Such loans are to be harmful to the financial health of the household. These purchases should be planned in advance and preferably performed previously saved resources of your financial planning.

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