Are you thinking about taking out a loan but just aren’t sure if it’s a good idea or not?
Well, good thing you are taking the time to think twice. Some things are not smart to take out a loan for.
You may already be under financial stress, but sometimes taking out a loan has the opposite effect of just piling on more. Let’s have a look at the top 5 things you should be avoiding taking out a loan for.
This is dangerous territory. You owe money on your credit card, right? They’re charging you high interest, right?
Well, things could get a lot worse if you take out a short-term personal loan to pay the money back. Short term loans usually come with high-interest rates and serious penalties for non-payment.
What happens if you don’t pay back a personal loan? Well, your credit score will be hit and your lender may seek to take possession of your property. But, most importantly, you are going to end up paying a lot more money!
You might be struggling with your mortgage and looking to refinance. But it is very dangerous to go into further debt to try and raise equity in your home.
If you’re already looking at what is needed for a home equity loan, you will see that most lenders will require that you show you are going to be able to make repayments. If it’s a longshot that you raise your home’s value and then refinance with greater equity, this might not end up so well.
What can student loans be used for? Education Expenses. End of story.
Check out the Federal Student Aid website for information on this. You mustn’t go spending your student loan money on cars and other grand expenses. This could land you in trouble.
So, can you use your student loans for anything? No.
There are several things you can buy that won’t depreciate, or not very quickly. For example, a home is an asset that has the power to appreciate over time.
But you may feel like taking out a loan to buy a car. But a car is a different story. It usually loses 50% of its value as soon as it leaves the showroom floor.
Save some money and check out what you need to know to take out a loan to pay your taxes instead.
You might want some quick cash to take advantage of a short-term opportunity. You might even think your lender wouldn’t lend you the money if it wasn’t a good idea. But that’s not the case.
Do they run your credit for a payday loan? The answer, usually, is no. The responsibility is all up to you to make sure you can pay the money back.
So, think for a long time before making the decision!
Whatever you decide to borrow money for, always remember that taking out a loan is not a joke. It may seem like a great idea to get quick money to buy something you want, or to invest in something.
But if you can’t pay it back, it’s just not worth it!
If you’ve found this article useful, why not check out some of our other great articles on financial advice?