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Borrow to Purchase an Appreciating Asset

The benchmark interest rate in the UK was last recorded at 0.5% as reported by the Bank of England. From 1971 to 2012, the UK interest rate averaged 8.25%. (according

In the US, the interest rates are also scraping bottom.

With interest rates lower than they’ve been in decades it may be time to remodel your home, go back to university, or replace that 15 year old car. I remember the days when the prevailing interest rates were hovering around 9 or 10%. Although I don’t think they’ll return to those stratospheric levels, they certainly won’t be dropping any lower.

Whenever you take out a loan, it’s best to borrow for something that will be around awhile.

Add a porch and boost your wealth in life

Add a porch and boost your wealth in life

What is Interest?

Interest is the premium you pay to a lender for the privilege of borrowing money. When interest rates are high, you pay more money to the lender in interest than when interest rates are low. In general, it’s preferable to avoid loans and only purchase items for which you can pay cash. That said, there are circumstances when taking out a loan a good idea. If you’ve been considering a home remodel, and that new kitchen will add to your home’s value, now might be the right time to take the plunge. For a loan of 6,000 GBP you may be able to obtain an interest rate of under 7%. Take out a 3 year loan and the monthly payment hovers around 184 GBP per month. Ask yourself whether the monthly payment fits in with your budget before taking out any loan.

Will interest rates rise?

Interest rates will definitely rise, the unknown is when. When interest rates rise, your payments and interest percentage will increase as well. With both the North American and European economies improving, interest rates are certain to increase during the coming years. If you have a suitable project, find the right personal loan for you and spend the money on a home remodel or to replace an old car. If you have plans to borrow in the near future, with rock bottom interest rates, now is a good time to make the commitment.

5 Responsible Borrowing Tips

  1. Never borrow more than you can pay back.
  2. Borrow only for items that will last a long time. Forget taking out a loan for a vacation, wedding, or gifts.
  3. Evaluate the interest rate and the monthly payment before you borrow. 
  4. Do not borrow without a steady source of income.
  5. Do not borrow on impulse and spend some time considering the purpose of the loan.

If you are in the market for responsible borrowing, now is a good time to borrow. As interest rates rise, so will the cost of that kitchen remodel.

What are your thoughts? Is there a big purchase in your future?



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