Reasons to Borrow Even When Interest is High

One of the ways that the federal government tends to fight inflation is by raising interest rates. These are the standard percentages lenders charge to borrowers in exchange for the use of their funds. In the past, we've talked about how interest rates impact the economy overall. Today, we're going to talk about something closer to home: how interest rates impact your ability to borrow money.?

In the simplest terms, taking out a loan when interest rates are high means that you're paying more to the lender. So why would you borrow at that time? Here are 3 reasons:

1. Delaying Funding Will Cost You

Whether you've been saving up to purchase your dream home or need urgent replacement of essential business equipment, sometimes funding cannot or should not wait. In those cases, it is best to weigh the total pros and cons of taking out a loan, then carefully consider any offers. Despite the extra up-front cost, loans like this can save you time, money, and stress in the long run.?

2. You'll Have Opportunities for Future Growth

If the alternative to taking out a loan is selling your stock, consider carefully. The market is far more volatile than interest rates over the short term. If your rates are still below what you expect to gain with a long-term portfolio, you may be better off holding on to your stock and taking out that loan. Plus, with long-term loans such as mortgages, you may have the opportunity to refinance in the future, which can also save you money.?

3. You're in an Optimal Position to Borrow

If your accounts are looking good, and you're just short on cash, don't let higher rates scare you away. So long as you can afford the higher payments, the investment you make with your borrowed funds will be more likely to pay off in the long run. Then, you will gain much more than you spent.?

Altogether, the decision to take out a loan relies on your understanding of your financial situation. No matter what you decide, be sure to take the time to analyze your books to determine whether or not taking out a loan will be a savvy financial decision. When in doubt, consulting a financing expert is always a good investment.?