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Monday, May 27, 2024

Do you really need to take out a loan?

Make no mistake; taking out a loan is a serious step as far as your personal financial situation is concerned. It is not something that you should jump into before giving it careful thought. Before you go ahead and push the button, you need to know that it’s the right choice for you.

Between a rock and a hard place

Many people have limited / no access to savings. It means that with the cost of living on the increase and outstripping the relative increase in our wages by a country mile, the level of people getting into personal debt is at an all-time high, without any savings, trying to cover emergencies like car repairs and unforeseen medical bills leave people between a rock and a hard place.

It’s in these types of situations when those with nowhere else to go, turn to use their credit cards. Once that journey has begun, it often ends with credit card debt proliferating to the stage where it is unsustainable.

But there are plenty of people who don’t or can’t have access to credit cards for one reason or another. So how do they manage their way out of a financial crisis? The answer is that they apply for (hopefully) affordable loans.

Have you exhausted all other options?

Affordable loans can be lifesavers. Of course, it’s the word “affordable” that’s key here. Taking out loans that you cannot afford to repay should be an obvious no-no. But even before you consider borrowing, you first need to make sure you have investigated other possible solutions. Even loans that are affordable are still a commitment.

The only alternative to approaching loan companies is getting financial help from friends and family or cutting down on something or cutting it out altogether.

Loaning money from family or close friends is great as long as they don’t charge you interest, and you are absolutely certain that you can pay them back in an agreed timeframe. If you can’t guarantee that, don’t do it. It’s the fastest way to lose friends and destroy relationships.

Check out your spending on essentials

As for cutting things down or out, that’s all very well providing they are not essentials. Admittedly we all have different views as to what constitutes essentials. But when the chips are down, things like smoking and drinking alcohol should be stopped. Not only will you gain financially by axing stuff like this, but your health will benefit too.

Yes, it will be uncomfortable, and yes, it will take grim determination. But as we’ve already said; taking out loans – even affordable loans – is a challenging thing to do. If, however, this is the route that you have decided to take, you owe it to yourself to do some serious research first.

Time really is money – here’s why

If you can afford to do so, you should always opt for the quickest repayment plan. The longer that it takes to repay your loan, the more it will cost you in terms of interest. Having said that, you must always leave yourself a little leeway.

If you pare your finances right back, you could run into trouble with making loan repayments when something unexpected comes up. So, affordable loans are not those where you can just about squeeze the repayments in if nothing else goes wrong. They are those whereby your finances have a little contingency built in to mitigate for the unexpected.

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