Taking out a loan has never been easier. Some lenders can put money in your bank within minutes, whilst others won’t even run a credit check. However, just because taking out a loan is easy doesn’t mean that you should rely on it as an option. Debts end up becoming extra bills to keep on top of and you should avoid them unless absolutely necessary. To help you determine the necessary from the unnecessary, here are just a few of the best and worst time to take out a loan.
The best times to take out a loan:
Paying for emergency costs
Sometimes life throws unexpected costs at us that need to be addressed right away. Such emergencies can include car repairs, home repairs, funeral bills, medical bills and vet bills. You can save costs on these loans by considering specialist schemes like CareCredit (which is interest-free). It’s worth noting that emergency costs can sometimes be avoided by having an emergency savings fund set aside or by using insurance schemes such as pet insurance and health insurance.
Investing in property/education/a business
Borrowing money can sometimes allow you to invest in things which can offer a return in the future. This includes mortgages for property, student finances for college tuition fees and business loans for launching a business. Funding these investments with savings isn’t easy and sometimes it can be practically impossible, making loans a sensible option. To save costs, try to look for specialist lenders such as this company BSF that specialise in funeral home loans. Loan advisors may also be worth talking to.
Refinancing/consolidating an existing loan
Some people claim you should never pay off one loan with another loan, but in some cases it can be a healthy thing to do. If you’re unable to pay off a high interest loan, it may be possible to pay the whole thing off by taking out a low interest loan, allowing you to save yourself money in the long run. Paying off multiple debts with a consolidation loan could also be beneficial, helping you to keep track of your debts more easily. They key is to avoid high interest loans at all costs.
The worst times to take out a loan:
Paying for personal luxuries
Ideally, you should avoid taking out loans to pay for personal luxuries such as vacations, clothing, sports cars and new furniture. None of this stuff is necessary to your life and you should therefore view these luxuries as treats. Save up for these personal luxuries and you will feel more rewarded when you obtain them. If you choose to take out a loan, you could live to regret spending money on them as you have to pay off the debts each month.
Funding a gambling habit
Taking out a loan to gamble with is a dangerous move. If you get lucky you could make a lot of money, but if you lose your bet you’ll have just lost a load of money for nothing – money that you still have to pay back. Overall, you should never gambled with borrowed money.
Borrowing money for other people
You should also avoid taking out loans for other people, unless you 100% trust them to pay you back. Someone that can’t take out their own loans is likely to have a bad credit history – which could be a sign that they’re not good at meeting payments on time. If they fail to pay you back, you could then be stuck with a loan that you never wanted and it could even affect your credit score.
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