It's Easier to Borrow Money When You Don't Really Need It. Here's Why

This is something every borrower needs to understand.

Most people borrow money at some point in the course of their lives. This could be a mortgage loan to buy a house, a car loan to purchase a vehicle, or a personal loan to fund a big purchase.

Sometimes, it's easy to get approved for a personal loan. But, in other situations, few lenders may be willing to offer the desired funds and borrowers may be offered a loan only with a very high interest rate -- if they are offered one at all.

A lot of factors determine how easy it is to borrow, but ironically, it's generally a lot easier to get a loan when you don't really need one. Here's why.

Borrowing is easier for people who already have a lot of money

There's a simple reason why it's easier to get a loan when you don't really need one.

If you're already in a very good financial position, lenders won't be worried about whether you have the ability to make payments. But if you are in dire need of cash and desperate to borrow, this can raise major red flags and prompt lenders not to give you the money you require.

When you apply for a loan, lenders take a look at many factors. Depending on the loan type, this could include reviewing your income, your bank account statements and other assets, and your credit score.

If you have plenty of money in the bank to easily pay off most of the loan balance or if you make a good income and the monthly payments are just going to be a small fraction of your earnings, then lenders feel good about giving you the loan. The risk of default is really low.

Of course, you may be wondering why someone would borrow in this situation. But people do it all the time. Those who are well off often take out mortgage loans and even car loans and business or personal loans because they don't want to tie up their cash. They could afford to get by without borrowing, but they choose to borrow strategically, and lenders let them do this because they know they'll earn interest and get their principal balance repaid.

Someone who really needs money, on the other hand, may not have a stable, generous income or a big bank account balance. Since their financial situation is precarious, lenders will not want to give them a loan because there's a high risk of missed payments.

What should you do if you really need to borrow?

While there's a good reason lenders are more likely to loan money to people who don't need it, it's an unfortunate situation for those who find themselves in dire need of funds with no easy way to get an affordable loan.

If you find yourself in this situation, the best option you have is to shop around very carefully for a lender. Don't fall victim to payday loan providers or other financial service providers who target desperate people with high interest rates.

Look for credit unions or small banks that may be more willing to work with you. And, if possible, consider a co-signer who can vouch for you. Just be sure you can definitely repay the loan; otherwise, your co-signer could be on the hook for it.

Ideally, you can try to save up an emergency fund over time so you don't find yourself forced to borrow. But it takes time to do that. If you need money in the meantime, you'll need to be careful which lender you trust to avoid making your financial situation worse in the long run.