Although taking out a loan can have a number of legitimate purposes, you should always attempt to avoid taking on new debt whenever possible. If you would like to go through life without ever having to take out a loan, there are multiple ways in which you can do so – but it is going to require due diligence and a commitment on your part. You will find that never taking out loans may restrict you from enjoying certain luxuries in life, but will balance that out with the fact that you will never have any large debts to pay off. Five ways that you can live without ever taking out a loan include;
Large Savings Account
One way to avoid ever having to take out a loan is to make sure that you always have a large amount of money in your savings account. Although saving up enough money to make large purchases, such as cars and homes, available to you, can take years, you will always know that you will have your basic expenses covered on a day to day basis. Putting together a large savings account is one of the best methods for avoiding loans later in life, and will allow you to practice good finances skills and financial management habits in the process as well.
Avoid Large Purchases
Most people take out loans to make large purchases. If you are looking to make a habit out of avoiding loans, you should try to shy away from as many large purchases as you possibly can. Most purchases like houses, cars, boats and other vehicles will require the use of a loan when purchasing new. To avoid large purchases, look at purchasing used items that cost substantially less and will not drain your bank account, or require that you take out a loan.
Pay For Things Outright
Instead of putting a down payment down and securing a loan, or paying for items over time, consider paying for big ticket items outright. If it costs $5,000, wait until you have that much available to you, and make the purchase in full. This ensures that you will always be fiscally responsible with your money, will never have to take out a loan, and can still purchase the things that you truly want.
Another option, although it is a loan, is to consider short term loans which provide multiple benefits over long term loans. Although the interest rate may be substantially higher than your average loan, you will find that short term loans typically end up costing you less because you are expected to pay the loan back much more quickly. For instance, with pay day loans, you are expected to pay the loan back the very next time that you receive a paycheck, which takes the payment terms out of your hands and makes it easy to follow.
Purchase Only What You Can Pay Off Immediately
Taking on loans does give you the benefit of helping you to build credit. Instead of completely avoiding them, you may want to consider taking loans out when you have money set aside in a separate account to ensure that you can pay the loan back at any time. This will allow you to build credit with virtually no risk involved.
Author Bio: Stevie Clapton works for OnlinePaydayLoans.net where you can find fantastic articles on everything financial.