Think Twice About Borrowing Money for These 4 Expenses

Will it result in an improved financial standing? If not, reconsider.

Thanks to the internet, it’s never been easier to borrow money. You no longer have to visit banks to apply for loans in person, and can instead research the best personal loans available and compare rates from the comfort of your couch. Despite this ease, it’s important to remember that when you borrow, you’re making a financial commitment to repay the loan, and depending on how much you’re taking out, it could take years. Here are a few purchases and expenses that it might be better to save up money for, rather than signing on the proverbial dotted line for a loan.

1. A wedding

While charging wedding expenses to a credit card can actually be a good idea (due to purchase protection and earning points or cash back), going into debt to have your dream wedding isn’t. After all, at its core, a wedding is a big and potentially very expensive party. According to The Knot, the average cost of a wedding in 2022 was $30,000. It’s an important milestone for many people, to be sure, and it’s a wonderful way to bring family and friends together to celebrate a loving relationship. But do you really want to start off your married life with additional stress in the form of a loan to pay back?

Plus, finances are a common reason couples fight, and if your money situation takes a turn for the worse while you’ve still got those loan payments, it could really put a strain on your relationship. Consider having a smaller wedding and cut costs where you can (say, by skipping the super expensive venue).

2. A vacation

Time off is important, but so is your financial future. You might be tempted to finance that European excursion you’ve been thinking about, but think twice. It might seem daunting to save up for a vacation, but it is possible. For example, you could consider using a travel rewards credit card to pay for your everyday expenses if you want to make travel a priority,but be sure you can afford to pay those charges off before the interest comes due. This way, you can earn points or miles to make that trip cheaper. Also, start planning and budgeting early. If you want to visit Europe in September, start investigating costs now.

3. A leisure vehicle

There are some financial gurus who will tell you that you shouldn’t even finance a necessary vehicle purchase, like the car that takes you to and from work every day. However, cars have skyrocketed in price the last few years, and if you live in an area without adequate public transportation, you might have no other choice than to buy a vehicle. Signing a short-term auto loan on an inexpensive used car is likely the way to go here.

However, reconsider the impulse to take out a loan to purchase a boat, ATV, snowmobile, or other unnecessary vehicle. These are no doubt fun to have, but taking on a big financial obligation for a leisure vehicle (not to mention the costs of repairs and insurance for, say, a boat) isn’t a great move. Just like your wedding or vacation, you might consider saving money to pick up a used boat, or make the boat purchase a longer-term goal, and figure out how much you can put aside in your savings account to make the dream a reality.

4. A new home appliance to replace one that still works

My washing machine is old and doesn’t work as well as it used to, so I’m considering replacing it with a new one in a few months. I say “in a few months,” because I would rather put aside the money over that time period, rather than financing the washer or leaving a big hole in my monthly budget by having to pay for it in one fell swoop. After all, my old one is still running.

If you’ve got an appliance that just isn’t up to snuff, or is seriously ugly, you might be thinking of financing a replacement. While this isn’t a bad move if you can get a 0% APR credit card for the purchase and know you can pay it off before you’re charged interest, rethink this idea if you don’t have the room in your budget for another payment. If you can’t qualify for 0% APR financing, definitely hold off and save up the money instead. If a necessary home appliance is out-and-out broken, it’s understandable that you need a replacement sooner rather than later. But if it still works, you may have time to scrape up the cash.

Ideally, it’s best to borrow money for expenses that will actively improve your financial standing if you can’t pay for them outright. This includes things like that car to get you to work every day, or the mortgage loan to put a roof over your head, or the personal loan to start the small business you’ve got a comprehensive business plan for. Otherwise, consider saving up the cash beforehand.