5 Sensible and 5 Ridiculous Reasons to Take Out a Loan

Loans: Yay or Nay?

What is your attitude towards taking out loans? I have quite a balanced view on borrowing money, providing it is for the right reasons. Here are 5 great and 5 not-so-great reasons for taking out a loan! Enjoy…


5 Reasons to Take Out a Loan

  1. To Buy a Car – Definitely one of the most common reasons for taking out a loan, buying a car is definitely a sensible reason to borrow. Bare in mind that you shouldn’t necessarily take the maximum amount available to you if you don’t need it. Choose a car and decide upon a budget before applying. Loan companies can sometimes be quite persuasive in offering a little bit more!
  2. To Consolidate Debt – If you are offered a loan with a competitive interest rate, it can often save you a small fortune on credit card interest. Credit card companies can often charge you in excess of 20% APR – over 3 times typical loan rates. Be sure to do the maths and work out the best repayment schedule and to look at terms and conditions on overpayments.
  3. For Your Dream Wedding – We all know how much weddings can cost! Sometimes a loan can help supplement savings and enable you both to make the day that little bit more special. Just be sure not to go overboard!
  4. For Home Improvements – A lot of people might disagree with me on this one, but they I am going to suggest it anyway! Home Improvements are a sort of investment anyway (providing that the money is spent on appropriate things) and can vastly improve your feelings towards your home. New carpets, kitchen, wall paper, doors, fixtures, heating etc. can make the difference between wanting to move house and staying put!
  5. For a House Extension – Given that the UK government has recently changed the rules around planning permissions (in favour of home owners) this could be a great move. A conservatory, extra couple of rooms or even an outbuilding can make your house substantially more ‘roomy’. Again, this may be a great alternative to moving into a bigger house; avoiding the hassle and substantial legal fees!


NOT to take out a Loan

courtesy of freedigitalphotos.net

5 Reasons NOT to take out a Loan

  1. Cosmetic Surgery – For starters, I think that plastic surgery (for non-medical reasons) is a waste of time. Personally, I think it makes woman look totally unnatural and a little bit fake! If you are adamant that you want to go under the knife, save up for it instead – hopefully the hard work will make you change your mind!
  2. Gambling – The first rule about gambling is never to bet more than you are willing to lose. If you are betting with borrowed money, you cannot afford to lose it – simple!
  3. Investing in the Stock Market – Stocks are variable and can of course go up as well as down. There is no sure thing and you are essentially taking a gamble. Don’t do it… Simple!
  4. Christmas – A time of year that we feel peer-pressure the most, it can be hard to resist the temptation of taking out a loan to buy all the things that you want! Christmas is a holiday, which has become so commercialized that we are surrounded and consumed by advertising. Disconnect yourself and search for presents in your original budget. Christmas happens every year – if you can’t afford a big one this year, save up more for next time!
  5. To Help a Friend – Lending money to friends can be dangerous when it is your own, never mind risking your credit score on their behalf. If they need the money in the first place, chances are that they aren’t great on planning when it comes to cash. Debt between friends can destroy amazing relationships and it is not worth the risk. It puts unwanted pressure and expectations on you both – something you can do without!


Have you had any good or bad experiences with loans?

The Savvy Scot uses

Genesis Theme Framework for WordPress



  1. I like it! And I agree the best way to ruin a friendship is to let the borrowing of cash come into play. The couple times I have given money to a friend I always assume it to be a gift, because a “loan” is just going to be a major pain in the ass and probably ruin the friendship.
    Kyle James | Rather-Be-Shopping.com recently posted..Frugal Hack #2: Christmas Shopping with the KidsMy Profile

  2. Definitely agree with your list of things not to take a loan out for.. Assuming you’d also add “buy a home” to the list of approved loans?
    The Happy Homeowner recently posted..$1400+ of Travel for $520My Profile

    • Absolutely – I was aiming this more at a personal loan, but a mortgage is definitely something I agree with (providing that you can actually afford the repayments)!!

  3. My co-worker’s friend took out a “cash/title” loan for $300 to go to the county fair (yes you heard that right). I think the total pay back was around $900 (crazy interest rate) or something like that. If you want an example of “ridiculous reasons take out a loan for” that one pretty takes the cake.

  4. Nice reasons. These are very true the ridiculous ones are truly ridiculous and will not help you.
    Debt Roundup recently posted..The 12 Costs of Christmas!My Profile

  5. Great Article and good tips!
    TakeItOffCanada recently posted..Smart Source & Redplum Coupon Insert Schedule DatesMy Profile

  6. I’m not big on taking out loans unless it is for a home. I like to pay cash for everything so I save up for the vehicle, weddings, renovations, trips etc. I realize that for some loans are what they need to get to the next step so if that’s what it takes for them it’s their choice. Great post. Mr.CBB
    Canadianbudgetbinder recently posted..The Grocery Game Challenge Dec 17-23,2012 Hot Stuff That Tabasco!My Profile

  7. Justin@TheFrugalPath says:

    I’ll agree with all of your choices except for taking a loan out to have your dream wedding. My in-laws did that for us and my brother-in-law’s wedding. After what they’re going through now I’d say it’s not the best idea.
    A small less expensive can be just as memorable.
    Justin@TheFrugalPath recently posted..Don’t Allow “I Can’t” to Become a Barrier to WealthMy Profile

  8. Jamie Dickinson says:

    Generally speaking you should only take out a loan if you can afford to pay it back. What you do with the money is that persons decision. Clearly, with some ventures such as gambling and stocks (which is essentially gambling)there’s potentially some difficulty in paying back the money.
    Jamie Dickinson recently posted..Avoid These Special Offer TricksMy Profile

  9. Mate i’m not sure I agree about taking out a loan to finance a car. Loan’s to me should only ever be taken out to be spent on an asset you expect to appreciate in value. Car’s only ever devalue unless you are buying an old collectable.

    Anyway, just my 2 cents.
    Glen @ Monster Piggy Bank recently posted..30 Tips – How to Stay Safe on the InternetMy Profile

    • Thanks for your opinion Glen – That is fair enough. In my situation I DID take a loan for a car – reason being that my cheap rustbucket was going to cost too much money to keep going and was not nearly as economical. Given that I spend about £300 a month on fuel – it is a sort of investment! :)

  10. I’m pretty sure I’d never tell anybody to take out a loan for their wedding. Why spend months/years paying back something that is over and done with in a matter of hours? Furthermore, I don’t believe there is evidence that more expensive weddings equate to better marriages. The people just need to get over themselves and do what they can afford.

    (Off the soap box now) :)

    I’ve heard countless stories where people took out a loan or borrowed from their credit card to gamble or invest in penny stocks. It’s always catastrophic too and completely ruins the family.
    Jason recently posted..Slow Cooker Pulled Pork Tacos RecipeMy Profile

    • I don’t think better weddings make better marriages either, but some girls have dreams that you want to fulfill :)

      Gambling to invest in penny stocks is a NIGHTMARE!!

  11. Definitely agree with this: “New carpets, kitchen, wall paper, doors, fixtures, heating etc. can make the difference between wanting to move house and staying put!” Sometimes it just makes sense to invest some money into your current house on upgrades. It makes a huge difference, and it may allow you to put off that new home purchase for 5+ years, which means you will (hopefully) be in much better financial shape. Great advice.
    DC @ Young Adult Money recently posted..20 Ideas for New Year’s ResolutionsMy Profile

    • Absolutely!! :) I have a personality which gets bored easily and need to refresh things etc. so I know that it is something I will definitely consider in a few years time!

  12. Good points. I’ve taken out loans for home improvements before. As long as the rate is favorable and below any investment return you could receive, I see no problem with it.
    My Money Design recently posted..Why You Need to Get Your Full 401k Matching as Early as PossibleMy Profile

  13. All 5 points are awesome, especially cosmetic surgery. My parents are retired and tell me about all their friends that get cosmetic surgery in retirement… I’m sorry, but that is the same as taking money and flushing it down the toilet – especially at 70 years of age.
    Jason Clayton | frugalhabits recently posted..Enjoy Saving Money? Don’t go Broke in the Process…My Profile

  14. I would only take a loan to consolidate debt, and if the home improvement would add at least as much value to the house as the loan. For a car or a wedding, I would do with what I have, many people regret spending so much on weddings when they can´t come with a deposit for their house, and a car, well, you can wreck it and be left with installments so not worth it either in my book.
    Pauline recently posted..How much do you spend on gifts?My Profile

  15. I totally agree with all of those,especially cosmetic surgery. It’s dangerous as well. Just grow old gracefully and appreciate what you have.
    Kim@Eyesonthedollar recently posted..It’s Fun to Stay at the YMCA-Gift Exchange RevealMy Profile


  1. [...] The Savvy Scot ~ 5 Sensible Reasons To Take Out A Loan & 5 Ridiculous Ones [...]

  2. [...] 5 Sensible and 5 Ridiculous Reasons to Take Out a Loan – The Savvy Scot [...]

  3. [...] 5 sensible and 5 ridiculous reasons to take out a loan- Savvy Scot [...]

  4. [...] 5 Sensible Reasons To Take Out A Loan & 5 Ridiculous Ones- The Savvy Scot [...]

Speak Your Mind


CommentLuv badge