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Borrowing can be a smart, strategic way to boost your bottom line. When done wisely and for the right reasons, a loan can mean the growth of a business, personal enrichment, the ability to take advantage of lucrative investment, and more. On the other hand, when used for frivolous goals like exotic vacations, cars you don’t need, and spending sprees, debt can turn into an unwelcome burden that makes your life difficult. There are many justifiable reasons to borrow money. The following seven are among the top reasons people do so and are all reliable ways to use loans the right way.

Purchasing a Home

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Few adults have the financial means to buy a home for cash. If you are one of them, congratulations, you’re in a tiny minority. However, if you’re in the other 99 percent of the population, you’ll almost certainly need to take out a mortgage to acquire your first or second home. The good news is that after many years of homeownership, many owners are well off enough to use the proceeds of a paid-off house to finance the purchase of a new one.

For retired people who have been careful with the money, kept an eye on their credit scores, and saved diligently, it’s often possible to purchase a home for cash as they enter their retirement years. For younger consumers, especially those in the early part of their careers, taking out a mortgage is a fact of life. Be sure to get your credit rating in order and save for a few years before you go house hunting. That way, you’ll be able to get a favorable interest rate and competitive terms on your home loan.

Paying for College or Graduate School

When you take out an education loan through Earnest in order to pay for college or grad school, you’re investing in yourself. If you choose wisely when selecting a school and major area of study, school loans can pay off in a big way. Not only do you gain a sense of pride that comes with a solid education, but you also face much better prospects for snagging a good job at a decent salary. College grads tend to have a much easier time getting and keeping jobs in their field of specialty.

Private student loans make it all possible because very few people have the means to pay for school upfront with cash. Another big advantage of education loans is that most of them don’t require you to begin paying until after graduation, which gives you time to set yourself up for success with a paying salary. Even then, rates and terms are among the most competitive around.

Buying a Car

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While not everyone has to sign a loan agreement to acquire a car, most people do borrow at least once in their lives to get one. Teenagers and adults who prefer used cars often purchase them with borrowed money as well. In an economy where new cars can be quite pricey, even pre-owned models can cost well over $15,000. Some working adults make it a personal goal to purchase a car for cash. That’s a laudable and achievable aim and is a good way of keeping your monthly expenses down. In all, the vast majority of consumers end up signing loan documents in order to get their first new car after they begin working full-time.

Paying Off High-Interest Debt

One of the best reasons to go into debt is to get out of it. That contradictory-sounding statement makes perfect sense when you take on low-interest rates to eliminate high-interest ones. The most common example of this clever strategy is the person who takes out a low-interest loan to pay off high-rate credit cards. As working people build their creditworthiness throughout their twenties and early thirties, they often find themselves in an enviable position. With an improved credit score, they’re able to get money at lower rates and wipe out the high-credit debt.

Catching Up on Tax Bills

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If you owe money to the IRS and are already in an installment agreement, you’re getting a rather good deal because the government usually doesn’t charge high rates on back taxes. But, if you owe more than $10,000 and are having trouble setting up an agreement with the IRS, it’s usually to your advantage to take out a personal loan or second mortgage to get rid of the tax debt. Eliminating an amount owed to the IRS has several benefits. Not only do you avoid the potential legal problems associated with high back-taxes, but you avoid the possibility of facing an asset seizure. It’s best to speak with a financial advisor if you do owe the IRS more than a couple thousand dollars to find the best way to resolve the situation.

Starting a Business

Starting your own business can cost as much as buying a new home. That’s why a large percentage of entrepreneurs and professionals go into debt to open their company’s doors. In fact, most doctors, lawyers, and CPAs take on at least some debt to get their practices started, as do tech, consulting, engineering, and other professionals. Unless your new company is defined as a small business, it’s unlikely you’ll be able to finance the startup out of savings. Starting out small with earning extra money online with a side hustle can be a great way to begin.

Consolidating Multiple Loans

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If you have many different kinds of loans at varying rates of interest, you can solve two problems at once by consolidating the debt into a single agreement. Not only can a consolidation mean less time paying bills, but it can also save you a bundle if your credit is good enough to get a lower average interest rate on the new contract.

Consider a consolidation if you owe on multiple credit cards, one or more vehicles, personal loans, medical expenses, and back taxes. Work with a financial professional to see if you can get a favorable interest rate for the consolidation. That way, you’ll end up making just one payment a month and saving a decent amount of money on the transaction.

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