Loans: Yay or Nay?
What is your attitude towards taking out loans? I have quite a balanced view on borrowing money, providing it is for the right reasons. Here are 5 great and 5 not-so-great reasons for taking out a loan! Enjoy…
5 Reasons to Take Out a Loan
1. To Buy a Car – Definitely one of the most common reasons for taking out a loan. Buying a car is definitely a sensible reason to borrow. If you take a look at car finance from BMW, they generally offer low rates as long as you have collateral. Bear in mind that you shouldn’t necessarily take the maximum amount available to you if you don’t need it. Choose a car and decide upon a budget before applying. Loan companies can sometimes be quite persuasive in offering a little bit more!
2. To Consolidate Debt – If you are offered a loan with a competitive interest rate, it can often save you a small fortune on credit card interest. Credit card companies can often charge you in excess of 20% APR – over 3 times typical loan rates. Be sure to do the maths and work out the best repayment schedule and to look at terms and conditions on overpayments.
3. For Your Dream Wedding – We all know how much weddings can cost! Sometimes a loan can help supplement savings and enable you both to make the day that little bit more special. Just be sure not to go overboard!
4. For Home Improvements – A lot of people might disagree with me on this one, but they I am going to suggest it anyway! Home Improvements are a sort of investment anyway (providing that the money is spent on appropriate things) and can vastly improve your feelings towards your home. New carpets, kitchen, wall paper, doors, fixtures, heating etc. can make the difference between wanting to move house and staying put!
5. For a House Extension – Given that the UK government has recently changed the rules around planning permissions (in favour of home owners) this could be a great move. A conservatory, extra couple of rooms or even an outbuilding can make your house substantially more ‘roomy’. Again, this may be a great alternative to moving into a bigger house; avoiding the hassle and substantial legal fees!
5 Reasons NOT to take out a Loan
1. Cosmetic Surgery – For starters, I think that plastic surgery (for non-medical reasons) is a waste of time. Personally, I think it makes woman look totally unnatural and a little bit fake! If you are adamant that you want to go under the knife, save up for it instead – hopefully the hard work will make you change your mind!
2. Gambling – The first rule about gambling is never to bet more than you are willing to lose. If you are betting with borrowed money, you cannot afford to lose it – simple!
3. Investing in the Stock Market – Stocks are variable and can of course go up as well as down. There is no sure thing and you are essentially taking a gamble. Don’t do it… Simple!
4. Christmas – A time of year that we feel peer-pressure the most, it can be hard to resist the temptation of taking out a loan to buy all the things that you want! Christmas is a holiday, which has become so commercialized that we are surrounded and consumed by advertising. Disconnect yourself and search for presents in your original budget. Christmas happens every year – if you can’t afford a big one this year, save up more for next time!
5. To Help a Friend – Lending money to friends can be dangerous when it is your own, never mind risking your credit score on their behalf. If they need the money in the first place, chances are that they aren’t great on planning when it comes to cash. Debt between friends can destroy amazing relationships and it is not worth the risk. It puts unwanted pressure and expectations on you both – something you can do without!
Have you had any good or bad experiences with loans?