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What Does It Mean to Finance Something?

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If you don’t have money in your account but need a product or service now, you may be able to finance it. But what does it mean to finance something?

Financing something refers to an arrangement in which a lender offers you money. You agree to repay the funds, plus interest and other fees, according to the financing terms and conditions. You can directly finance a specific purchase, a needed service, or simply a lump sum of cash to spend however you choose.

Financing Examples

Financing has broad applications. In fact, you might be surprised how often this concept intersects with our lives. Here are some examples.

  • Car Loan: Over 100 million Americans finance their vehicles. A car loan helps you get the wheels you need, though inflation increases the average monthly amount you’ll pay.
  • Installment Loan: This is a good choice if you need cash for multiple purposes or for something you can’t get dedicated funding for.
  • Mortgage: Very few people can afford a house outright without financing it.
  • Student Loan: Costs for higher education have skyrocketed, leading many students to conclude that their only option for college is to finance their education with student loans.
  • Credit Card: Credit cards are perhaps the most popular option for financing smaller purchases. You can put anything on a credit card—from a Big Mac to a 7-night cruise. Interest usually starts to accrue after a set grace period, or immediately if you don’t pay off your balance every month.
  • Business Loan: It takes a while for the average startup to consistently turn a profit, so many businesses take out a loan to help them get off the ground, buy equipment, and even pay employees.
  • Home Improvement Financing: House repairs can be expensive, but you can’t always delay them. If you need a new roof, for example, it may be unsafe to wait. You might also take out a home improvement loan to upgrade your house, increasing its value and making it a better place to live.

Why Do People Finance Things?

There are all sorts of reasons you might choose to pursue financing. Sometimes, it’s an urgent need, or maybe you want something and just can’t wait for it.

Needs That Can’t Wait

Unexpected expenses can strike at any time, and sometimes, they represent needs that simply can’t be delayed. Maybe your car needs a new transmission or repairs after an accident. Or your pet gets sick and needs to be rushed to the vet. You could be hit with an unanticipated tax bill or require emergency surgery.

Sometimes, you simply need money, and financing unexpected expenses is the only way to address the issue immediately.

Important Things You Want

Of course, it’s not always a matter of life or death—and that’s perfectly valid. Financing allows us to receive items we haven’t completely saved up for yet. Because of interest and other fees, you’ll end up paying more by financing these items than you would if you had the cash to pay for them outright, but that may be a tradeoff you’re willing to accept.

So, you might consider financing all or part of a vacation if you really need a break. You could finance a new TV before having friends over for the Super Bowl. You may have the opportunity to buy Taylor Swift tickets, but you need to jump on them now or lose them to scalpers. Perhaps you want to finance a boat or jet ski to enjoy long days on the water now and pay for your purchases over time.

Either way, you can see why financing is attractive when the money simply isn’t there for what you want or need.

Financing FAQ

WHAT IS THE DEFINITION OF FINANCE?

Although it sounds similar to financing, finance is a much broader term that refers to the financial industry and anything that involves money. Bankers, accountants, and loan officers all work in finance. A business may have a finance department. If it’s connected to money management, it falls under the umbrella of finance.

DOES FINANCING HURT YOUR CREDIT?

Not directly, although any new financing agreement affects your debt-to-income ratio, one of several factors that impact your credit rating. Long-term financing impacts your credit the same as any other payment obligation: Adhering to your repayment schedule according to the financing agreement terms can improve your credit; if you miss payments or make them late, it can hurt your credit.

Use Power Finance Texas Loans to Finance Your Next Purchase

If you have a valid Texas driver’s license, a job with a minimum income, and an active checking account, you can apply for an installment loan with Power Finance Texas. Submit your application now and receive your funds as quickly as the same day.