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Savvy tips for smart borrowing

smart borrowing

July 17, 2013

From renovating your home to purchasing a new car, there’s always an excuse to borrow money. But there are certain times when you should hold off on making a purchase. Determining when the time is right is the answer to your financial wellbeing.  The good news is if you need to borrow money, there are ways you can be smart about it. Here’s how.

Consider a Line of Credit

Looking to bolster your small business, or catch up on high-interest credit card payments? Consider opening a line of credit, which allows you to access money whenever and wherever you need it. In addition to being flexible, a line of credit typically offers better rates of interest than most credit cards for low-cost borrowing. 
Small businesses, for example, can secure extra money to generate the cash flow needed to realize profits. Others may wish to take advantage of a lower-rate line of credit by transferring the balance owing from a high interest-carrying credit card.

Harness your home equity

Are you planning to pay for your child’s tuition? Saving for retirement? Putting in a swimming pool, home renovation, or other goal? Or is your financial goal to purchase an investment portfolio for retirement? 
Whatever your stage in life, a home equity loan can be a viable source of financing. By tapping into your home equity, you can borrow for a longer period of time typically at a low rate. What’s more, in some instances, the interest accrued may even be tax-deductible.

Find a mortgage to fit

Are you ready to buy a home? The beauty of today’s mortgages is that they’re made to fit. Aspiring or existing homeowners can choose from open term, closed term, variable or fixed mortgage rates to suit their financial needs. The best part about a mortgage, though, is that it’s used to purchase an asset that’s likely to increase in value, such as real estate.

For all the good reasons to borrow, there are some not-so-smart ways to incur bad debt. For example, taking cash advances on your credit card will likely lead to hefty interest charges as fees that mount from the day of the advance. Borrowing money to purchase a luxury item that will only depreciate in value over time is also a borrowing tactic you’d be smart to avoid.