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Blog   »   February 2015   »   To Borrow or Not To Borrow?

To Borrow or Not To Borrow?

That is the question

...and when is the right time to borrow?

To answer these questions we have to look at a number of things.

What you want to buy

If it is a small ticket item such as a TV or a washing machine with a price tag of say under $1,000.00 and you can’t afford to either pay cash or put on your credit card and have it paid off in full within say 3 months (even at the high credit card rate the interest in dollar terms over 3 months is small) then perhaps it is something you shouldn’t buy.

If you are looking to purchase a new excavator, truck, car, boat or real estate then we must consider:

  • Should I save up and pay cash or finance the purchase?
  • Can I afford the repayments?
  • Will the asset earn income for me?
  • Will the asset contribute to wealth enhancement?
  • Will the asset make my life better?

Should I save up and pay cash or finance the purchase?

With interest rates at an historical low and therefore the actual interest charges also low, now is the best time to borrow especially when you consider the forecast is for rates to remain low.

Also consider that the asset you buy now will be enjoyed now, maintenance costs are low, and perhaps as our dollar drops in value compared to other currencies the price of the imported excavator, truck, boat, or car will increase.

Can I Afford the Repayments?

Sometimes this question is answered with the word “Undoubted”.

Other times you may require the expertise of a financial expert such as Hunter Business Finance to ensure your financial situation is clearly demonstrated in the best and most appropriate way to the lender.

Raw numbers from your accountant do not always tell the correct story.

Hunter Business Finance interprets the financials and reveals to the lender your true financial position. Of course if the information provided by your accountant / tax adviser isn’t sufficient for your current needs, they will advise you why, show you where and how to correct your position either immediately or for future prospects.

Will the asset earn income for me?

If you’re purchasing an investment property – yes it will earn income and may also increase in value over the coming years at a rate faster than the current interest rates.

If you’re purchasing a truck, excavator, machinery or commercial vessel / boat – yes.

If you’re purchasing a boat or car for pleasure – then no, it won’t earn you income.

Will the asset contribute to wealth enhancement?

If it’s a car or boat for personal use – no.

If it’s a car or boat for business use, or a truck, bobcat, excavator or other income generating equipment  – yes

If it’s an investment property - yes

Will the asset make my life better?

If the asset saves hassles with maintenance by replacing old, obsolete, or just tired equipment prone to break down - then yes it could make your life considerably better.

If the asset gives you personal satisfaction such as a car, boat or new residence and the dollar outlay is exceeded by pleasure – yes.

If buying an investment property that will produce an income and / or future asset improvement – yes

So after considering whether to borrow or not to borrow, if you decide to borrow there are considerable advantages from having an experienced broker such as Hunter Business Finance do the leg work and application presentation for you.

 

Posted: 10/02/2015 1:54:08 PM by Hunter Business Finance | with 0 comments

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