{"id":340,"date":"2021-01-08T05:49:47","date_gmt":"2021-01-08T05:49:47","guid":{"rendered":"https:\/\/www.mylenderloans.com\/blog\/?p=340"},"modified":"2021-01-08T05:51:33","modified_gmt":"2021-01-08T05:51:33","slug":"rational-vs-irrational-borrowing-which-side-are-you-on","status":"publish","type":"post","link":"https:\/\/www.mylenderloans.com\/blog\/rational-vs-irrational-borrowing-which-side-are-you-on\/","title":{"rendered":"Rational vs Irrational Borrowing: Which Side are You on?"},"content":{"rendered":"\n<p>You all\nhave begun the journey of 2021. Hopefully, you will have a pleasant journey\nthroughout the year. Of course, you would have learnt from your previous\nmistakes and made a resolution not to repeat those mistakes. Some of you would\nhave decided not to borrow money and live off what you earn instead. It seems\nexciting to envisage a life free of debt, but as you come across the harsh side\nof reality, it burst your sweet, imaginative bubble forthwith. <\/p>\n\n\n\n<p>Living off\nyour means is good, and everybody should try to learn the art of spending\nwithin their limits, but it does not allow an interpretation that you cannot\nborrow money. As long as you need money to fund unforeseen expenses, there is\nnothing wrong to take out a loan provided you can pay it off. It is crucial to\nunderstand the difference between rational and irrational borrowing. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What is rational borrowing?<\/strong><\/h2>\n\n\n\n<p>Rational\nborrowing is a practice that suggests taking out a loan only when you need it,\nand you are able to repay it. You will be a rational borrower if you meet the\nfollowing conditions:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>You do not borrow when you cannot\nafford<\/strong><\/li><\/ul>\n\n\n\n<p>Suppose you\nhave decided to buy a car and you are considering to apply for a personal loan.\nYou find that you are to repay the debt over a period of 18 months and you will\nhave consumed all of your savings by the time you repay your debt. <\/p>\n\n\n\n<p>As a\nrational borrower, you will put it off. It may not be a difficult financial\nsituation for most of you, and you will take out a loan, but it is not a\nrational approach. When you end up with zero balance in your savings account,\nyou will have difficulty to meet unexpected expenses, and as a result, you will\ntake out a new loan. The cycle will continue, and you will eventually fall into\na debt trap. <\/p>\n\n\n\n<p><strong>You are not borrowing for investing<\/strong><\/p>\n\n\n\n<p>No matter\nhow passionate you are about investment, you will never borrow money to buy\nshares, stocks, mutual funds, or invest in any other assets. A rational\nborrower never does that because you will make money from your investment\nbecause there is no certainty. <\/p>\n\n\n\n<p>If your\ninvestment sinks in, it will bring a disaster to your finances. The total cost\nof the loan includes the amount you have borrowed and the interest payments and\nother fees. It is always suggested that you should not take out <strong><a href=\"https:\/\/www.mylenderloans.com\/doorstep-loans.html\">provident loans\nin Ireland<\/a><\/strong> to invest.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What is irrational borrowing?<\/strong><\/h2>\n\n\n\n<p>Irrational\nborrowing is a practice of taking out a loan to meet regular expenses without\nbothering much about affordability. Here are the symptoms of irrational\nborrowing:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>You are borrowing money to pay\nutility bills<\/strong><\/li><\/ul>\n\n\n\n<p>Your\nmonthly income should allow you to pay all your utility bills. These are\nregular expenses, so your income must have enough wiggle room to meet them. Even\nan unforeseen expense should not keep you from paying for such bills because\nyou have saved money for a rainy day. <\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>You are borrowing money to shop<\/strong><\/li><\/ul>\n\n\n\n<p>If you are\nborrowing money to shop, you are an irrational borrower. A rule of thumb says\nthat you should set aside money for shopping anything from household items to\nclothes. This is the planned expenditure, so you should create a budget to buy\nanything. <\/p>\n\n\n\n<p>There are\ngenerally two types of borrowers: rational and irrational. Rational borrowers\nmake the most of their money and borrow only when it is urgent and can pay off\nthat money. As long as you can put off the purchase, you should. It is always\nsuggested that you should pay for your needs out of your own pocket. <\/p>\n\n\n\n<p>Contrary to\nthis, the irrational borrower is one who is habitual of funding all needs. This\nis one of the significant reasons for falling into a debt trap. Now you have\ngot to know the difference between both rational and irrational borrower. It is\nup to you what you want to be. Try to develop habits of being a rational\nborrower. Borrow money only when it is urgent provided you can afford to pay\nback the money. <\/p>\n","protected":false},"excerpt":{"rendered":"<p>You all have begun the journey of 2021. Hopefully, you will have a pleasant journey throughout the year. Of course, you would have learnt from your previous mistakes and made a resolution not to repeat those mistakes. Some of you would have decided not to borrow money and live off what you earn instead. It&#8230;<\/p>\n","protected":false},"author":1,"featured_media":343,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[39],"class_list":["post-340","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-provident-loans-ireland","entry"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.mylenderloans.com\/blog\/wp-json\/wp\/v2\/posts\/340","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.mylenderloans.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.mylenderloans.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.mylenderloans.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.mylenderloans.com\/blog\/wp-json\/wp\/v2\/comments?post=340"}],"version-history":[{"count":1,"href":"https:\/\/www.mylenderloans.com\/blog\/wp-json\/wp\/v2\/posts\/340\/revisions"}],"predecessor-version":[{"id":342,"href":"https:\/\/www.mylenderloans.com\/blog\/wp-json\/wp\/v2\/posts\/340\/revisions\/342"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.mylenderloans.com\/blog\/wp-json\/wp\/v2\/media\/343"}],"wp:attachment":[{"href":"https:\/\/www.mylenderloans.com\/blog\/wp-json\/wp\/v2\/media?parent=340"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.mylenderloans.com\/blog\/wp-json\/wp\/v2\/categories?post=340"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.mylenderloans.com\/blog\/wp-json\/wp\/v2\/tags?post=340"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}