Under which of the following circumstances would it be financially beneficial to you to borrow money to buy something now and repay it with future income?
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A. B. C. D.C
The answer to this question is (C) When you need to buy a car to get a much better paying job.
In general, borrowing money to purchase something now and repay it with future income can be financially beneficial if the item being purchased will have a long-term positive impact on your finances. The key consideration is whether the return on investment of the item being purchased will be greater than the cost of borrowing the money.
Let's examine each option:
A. When some clothes you like go on sale: This is not a financially beneficial reason to borrow money because clothes are typically a consumable item that will not appreciate in value or generate income.
B. When the interest on the loan is greater than the interest you get on your savings: This is not financially beneficial because you would be paying more in interest on the loan than you would earn in interest on your savings.
C. When you need to buy a car to get a much better paying job: This can be financially beneficial because the increased income from the better paying job can more than offset the cost of borrowing the money to purchase the car. In this case, the return on investment of the car is the increased income from the better paying job.
D. When you really need a weeklong vacation: This is not financially beneficial because a vacation is a consumable item that will not appreciate in value or generate income.
In summary, option (C) is financially beneficial because the item being purchased (the car) will result in a long-term positive impact on your finances (the increased income from the better paying job) that can more than offset the cost of borrowing the money to purchase the car.