Times You Can Say Yes to Debt
Times to take on debt do not come often, but additional debt can be a strategic financial move under the right circumstances.
Capitec Bank outlines three scenarios where saying “yes” to more debt might actually benefit your financial future.
Below, we explore these scenarios in detail and explain how Capitec’s financial products can support these decisions.
1. Investing in Education and Skills Development
Education is one of the most powerful investments you can make.
Borrowing to fund education- whether it’s a formal degree, certification, or short skills-based course – can significantly increase your employability and long-term earning potential.
Why It’s a Smart Move
- Increased Earnings: Studies show that higher education leads to higher salaries and better career prospects.
- Job Security: Skilled professionals are less likely to face unemployment during economic downturns.
- Personal Development: Expanding your knowledge and skill set can open doors to new industries or promotions.
Capitec Bank allows customers to apply for personal loans of up to R250,000.
This can be used to pay tuition fees, purchase study materials, or finance online courses. The flexibility of repayment terms ensures that the debt can be managed in line with your income and financial goals.
Example: If you borrow R50,000 to complete a technical skills course, you could increase your salary by R5,000 per month after gaining employment. This increase can easily cover your loan repayments and provide a long-term return on investment.
2. Starting a Side Hustle or Small Business
Starting a side hustle has become more popular as people seek multiple income streams.
However, launching a small business often requires upfront costs for equipment, inventory, marketing, or training. Using a loan to fund these expenses can fast-track your entrepreneurial journey.
Why It’s a Smart Move
- Self-Sufficiency: Instead of relying on a single source of income, you diversify your earnings.
- Potential for Passive Income: Many side hustles, like e-commerce or rental services, generate ongoing income.
- Scaling Possibilities: With the right financial support, your small business can grow into a full-time venture.
A Capitec personal loan could be used to purchase essential tools or technology needed to launch your business. Since the bank disburses funds immediately after approval, you won’t have to delay your business plans.
Example: A freelance graphic designer could use a loan of R20,000 to purchase a high-end laptop and design software. This equipment would enable them to work on larger projects, increasing their client base and income potential. As the business grows, the income can cover loan repayments.
3. Purchasing a Reliable Vehicle
Owning a car is more than just a convenience.
For many people, it is essential for commuting to work, traveling for business, or accessing better employment opportunities. If your current vehicle is unreliable or public transport limits your mobility, a car loan may be a good option.
Why It’s a Smart Move
- Job Opportunities: Owning a vehicle can expand your job search radius, giving you access to better-paying jobs.
- Convenience and Flexibility: Unlike public transport, owning a car allows you to manage your schedule and reduce commute times.
- Business Use: Entrepreneurs like delivery drivers or ride-share operators rely on vehicles for income generation.
Capitec’s personal loans provide a fast and accessible way to finance a vehicle.
Unlike traditional car loans that restrict you to financing a new car, Capitec’s personal loan gives you cash to purchase a second-hand car, pay for vehicle upgrades, or fund maintenance.
Example: If you purchase a second-hand car for R100,000 and use it for ride-sharing services, you could earn up to R15,000 per month in revenue. Even after loan repayments, you would have significant extra income.
How Capitec Loans Work
Capitec Bank offers personal loans of up to R250,000, with a simple and fast application process.
Loans can be accessed online, in-branch, or through Capitec’s mobile app. Once the loan is approved, funds are disbursed immediately.
Capitec’s loans are designed with flexibility, allowing borrowers to choose repayment terms that suit their financial needs.
Key Features of Capitec Loans
- Loan Amount: Up to R250,000
- Repayment Term: Choose a term that aligns with your budget
- Disbursement: Funds are available immediately after approval
- Use Cases: Debt consolidation, education, business investment, or personal purchases
When to Say No to More Debt
While the three scenarios above can justify taking on more debt, it’s important to recognize when it’s not a good idea.
Here are situations where saying “no” to debt is the better option:
- Impulse Purchases: Avoid using loans for luxury items or non-essential goods.
- Unstable Income: If your income is irregular or uncertain, it’s risky to commit to loan repayments.
- High-Interest Debt: If the interest rate on a personal loan is significantly higher than your investment return, it may not be a sound decision.
Final Thoughts
There are times to take on debt. Debt isn’t always bad.
If used wisely, it can be a tool to improve your life and financial situation. Capitec Bank’s personal loans offer flexible terms, immediate access to cash, and multiple ways to apply.
The three situations where debt can be beneficial – education, side hustles, and car ownership – are all long-term investments that can yield higher returns than the cost of the loan.
It is your responsibility to plan properly so you know that you are not borrowing money to waste on a dream that is not reality-based.
A business is not successful because you think or hope it will be. You need to plan properly and finance responsibly.
Read more about when debt is good.
