Economic Goals

It is reasonable to assume that when you are in a bit of debt, you shouldn't borrow more money to pay off what you owe, like the old saying "taking from one hand to feed the other." But while this axiom holds true most of the time, you have to consider that there are times where it makes sense to borrow from one source to pay another.

For example: if you have a wallet full of store credit cards with high interest rates on each one of them, it would make sense to get a low-interest loan to consolidate your credit card debt and pay them off entirely, letting yourself repay one source with a lower interest rate. The money you would save in interest charges would justify the financial decision.

Another example would be if you were out of cash, and you still needed to pay some of your bills. If you were to miss your payment on your utilities, you could be faced with a disconnect, and it would cost you more money in services charges and reconnect charges to re-establish your heat, your light, your gas, or your telephone. But if you were able to access short-term personal loans, you could justify a small cash loan to pay off your outstanding bills. Even if you consider that short term personal loans and cash advances usually come with high interest rates themselves, if you compare the cost of losing your services, the time it would take to get everything back up again, how it would affect your credit, and the difference in the service charges or interest rates, it might be a good decision.

Now ideally we would all like to live debt-free lives. But when we must face personal situations where the money isn't available, it's good to weigh our options to see what the best financial course of action would be.