Many people need financial help sometimes, which is why lenders exist to let them borrow money and pay it back at a later date.

When you’re a borrower, you must borrow money for the right reasons, however, so you don’t become reliant on other people’s money or bite off more debt than you can chew.

Reasons Why You May Need To Borrow Money

That’s why we’re taking a look at the five reasons you may need to borrow money. There are others, of course, but most borrowers will borrow for the reasons we’ve outlined below.

Which debt a borrower will need depends on their specific situation. There’s a difference between long-term home equity loans and CreditNinja’s quick cash loans, after all.

1. Emergency Costs

Starting with the obvious, many people need loans to cover the costs of emergencies. Emergencies come out of the blue and often come with a price tag attached to them, so it’s a good idea to have emergency savings to deal with those situations. Sometimes, you don’t have those savings or you can’t access them, which is where you’d need to borrow money.

Maybe the emergency itself is related to money, or a lack of it, to be more specific. In other cases, emergencies can lead to repairs, replacements, or even medical/funeral costs that can come out of the blue. Other related costs, like travel, medication, service animal upkeep, and even parking can also be financed by a loan.

If you don’t have emergency savings, those costs can put your finances in peril. A quick-cash loan or a personal loan can save you in those situations. It’s those situations where borrowers need access to more money, more so than any of the others on this list. Suitable emergency loans are paid out quickly to cover the related costs as quickly as possible.

Be wary of loan providers who seem to target those suffering from emergencies. When somebody is desperate and urgently in need of cash, they are easily swayed into unfavorable loan terms that put them at a disadvantage, or they might even get fully scammed.

2. Debt Consolidation

If a borrower is swamped with debt, another loan can be used as a form of debt consolidation. Debt consolidation is where somebody takes out a personal loan that combines the separate repayments of several outstanding debts into a single monthly payment. This is more convenient and easier to manage for the borrower, allowing them to pay off their debt in fewer payments.

When this is done, the borrower agrees on a timeframe to pay off this new consolidated debt. This can provide a clear path to a debt-free future. You, as a borrower, may also be able to renegotiate interest rates. This can turn multiple high-interest rate loans into one larger, lower-interest-rate loan, saving you money in the long run.

Note that taking out new loans to pay for old ones isn’t often the solution. Debt consolidation is the exception that proves the rule – because it simply reorganizes and renegotiates the terms of your existing loan instead of piling on more debt.

3. Vehicle Costs

You may need to borrow money to pay for a vehicle. While they can be used to finance any vehicle, most borrowers will use loans to pay off cars. Having access to a car allows for travel, which can then be used to generate income, so having a car paid off is important to a person’s finances. People can and have used loans to finance RVs, boats, and other leisure-based vehicles too.

By using a loan, you can keep your checking account and your emergency funds full for your other financial obligations. Then you can use the vehicle to facilitate travel, get more money for yourself, and then pay off the vehicle in later repayments.

These can take the form of personal loans that you use to get the vehicle or you can get dedicated auto loans. With that second option, the vehicle is secured to the loan, so you’ll lose it if you don’t keep up your repayments. That’s a big risk, so you should make sure you absolutely need to finance your vehicle with an auto loan and that there isn’t a less risky means of doing so.

4. Home-Related Costs

Like with vehicles, the state of your home can affect your ability to make and save money. There are many costs related to homeownership and upkeep such as moving costs, home remodeling costs, and appliance purchases, to name a few. Maybe you can think of others.

With moving costs, a loan can finance the movement of furniture and appliances across longer distances. If the move is important for your economic prospects and saves your emergency fund from bearing those costs, then financing the move with a loan can be useful for financial stability.

Home remodeling is typically more expensive than moving or purchasing appliances, so it’s the most common home-related cost that gets financed by loans.

Whether it’s landscaping, redecoration, repairs, or rewiring, each of these can require qualified professionals and rigorous safety standards that don’t come cheap. Not everybody has that money on hand, so borrowing can help.

Appliance purchases can be expected or unexpected. Sometimes appliances break and need a replacement ASAP, in which case a small loan can stop you from dipping into your emergency funds.

After all, a broken dishwasher might be a small-scale domestic nightmare, but it doesn’t qualify as a full-blown emergency.

5. Personal Costs

Lastly, many personal costs might need to be paid off with borrowed money. In more serious cases, legal costs may be supplemented with a loan, along with other financial obligations that keep your life comfortable and stress-free. These are the personal costs that can justify getting an official loan from your bank, credit union, or other institutions that can lend you money.

Other notable examples of personal costs are those that are related to weddings, honeymoons, and other leisure-based activities. Whether you need a loan to meet vacation costs is something only you can answer, not everybody needs to have those things.

While a wedding is a rite of passage that may justify borrowing money, it’s generally considered irresponsible to borrow money for the sole purpose of going on a vacation.

In those cases, it may be best to avoid loans and borrow money from family or friends. Your relationship needs to be strong enough to introduce money into the equation but it’s a lot safer and easier than applying for bank loans.

Remember to pay them back, however, because you’ll harm your relationship with them if you don’t!