There are lots of ways of borrowing these days and it can be easy for many people to get a loan. This means that whether it is a mortgage, personal loan, overdraft or credit card, many people can get hold of money if they need. Although this can be very useful, there are circumstances when we tend to borrow money when it may not be necessary. It is wise to think hard about all types of borrowing to make sure that this is not happening.
Some people will borrow money for their hobby, for example. This could be considered to be unwise and it is worth thinking through the consequences before you do borrow money. Often we have quite inexpensive hobbies such as art and crafts, cooking and baking or reading and watching television. However, some hobbies can be really expensive such as foreign travel, collecting cars or buying fine art. Even a hobby that could seem to be affordable, could become really expensive if you buy a lot of things for it.
Borrowing money for luxuries like this is often seen as a bad thing. This is because when you borrow money you have to pay for the privilege. How much you pay will depend on who you borrow it from, what type of borrowing it is, how much you borrow and how long for. However, it is certain that you will end up paying more for the item, than if you paid with money that you already had. This means that you could end up paying more for the item than you would have paid for it, had that been the price when you bought it. If you pay on a credit card, there is no deadline for when you have to pay back everything that you owe, just a minimum repayment amount that you have to make. This means that you could end up accumulating interest on the borrowing for a really long time and it could be extremely expensive. It is not always easy to keep track of how much interest you have paid, so the reality of how much it cost you is often lost.
With all borrowing it is sensible to think hard before you go ahead. Calculate how much extra it will cost you and look at how much the repayments will be. Consider whether you will be able to afford those repayments or not and if you can, think about whether you will still struggle or if it will be easy to manage them. Imagine what might happen if your bills suddenly increase or your income decreases and how you will manage to pay all of your bills including these repayments. When you have calculated how much the item will cost in total, including the cost of the loan you can then decide whether you really think it is worth it. It may be better to wait and save up for the item, use money from a savings account or to not have it at all. It is up to you to decide whether you think that it will be worth it or not. It is always good to consider whether you might find being in debt stressful. Hobbies are supposed to be relaxing and fun, but if as a result of them, you feel stressed and worried, then maybe it is worth not paying out the money. A lot of satisfaction can come from being free of debt and form saving up to pay for things and so it is worth thinking about that as well.
So it is not easy to say whether borrowing money for a hobby is right or wrong. However, it is important to be aware of the consequences before you borrow money. Think both about how good it will be to have the money and pay for your hobby, but also about how it will feel to be in debt, how much dearer the things will be and how you will manage the repayments. Also consider what might happen if you are short of money and cannot manage the repayments. This could happen if your income decreases or stops for some reason or your spending increases, due to higher bills or needing certain new items.