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As far as money management goes, we are always advised to avoid taking out loans and to save up instead. But sometimes, that simply isn’t a practical solution to a problem. While taking out a personal loan can’t be the solution to all problems, there are times when a bit of extra cash can really help you out.
Before you take out any loan, you should always make sure that you know exactly how much the loan will cost you overall and be certain that you can make your monthly payments. Companies like Credit Culture are great for this because the calculator on their site allows you to play with the numbers to see what you can afford.
So, when should you consider taking out a loan?
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Small But Essential Repairs or Home Improvements
Home repairs are essential to maintain the quality and value of your property. Though you might be tempted to let a few issues lie for a while, the expense of solving the issue could quickly rise. This is a problem because if you are trying to save up, the goal posts will move again and again.
Taking a small loan to facilitate a small home repair is a good idea because you will avoid the problem getting worse and be able to enjoy your home. A healthy home can make a huge difference to your wellbeing. Even your furniture can affect your health!
Swap Out High Interest for Low Interest
One of the main reasons people choose to consolidate their debt is to make the most of lower interest rates that have become available to them. Though you should be cautious because you may not qualify for the advertised lowest rate with your credit score.
Consolidating your debt into a loan can reduce your interest rates though because you can secure your debt against an asset. Generally, personal loans come with a smaller interest rate than a credit card and lots of companies offer promotional rates to newcomers. Finally, if you are planning to take a few years to pay off your debt, a loan is usually available on a longer term than a credit card.
However, if you are close to paying off your debt or you only took a small loan, to begin with, it probably isn’t worth the effort of swapping to a lower interest.
A Large Essential Purchase
Sometimes, you just can’t wait to make a large purchase and though, ideally, you would be able to save up, a loan is the next best option. For example, if you have moved house, you might need to top up your funds to be able to furnish your new pad. This doesn’t mean that you can splash out but should help you get started.
Whenever you take out a loan, you must always think in terms of value for money. Loans aren’t inherently bad, but lots of people use them irresponsibly. Be very careful to make sure that you only use your loan for essentials and save up wherever you can.