The Danger of Loans

The danger of loans is in fact a slightly misleading term and should strictly speaking always be referred to as the dangers of loans. There are many dangers of loans, particularly for the ill-informed and/or unwary and it is therefore imperative that anyone considering taking out any form of loan investigate in full not only their options but the terms and conditions of any prospective loan agreement prior to signing any formal paperwork.

The most obvious danger of loans is the prospect of a future inability to make the required monthly repayments. This could be due to loss of employment through circumstances beyond one’s control, or perhaps accident or long term sickness causing an inability to work and thus get paid. Although there are associated insurance products which can be taken out at the time of loan application against this unfortunate eventuality, much has been made in recent years regarding the miss-selling of these products by loan providers and the astronomical and disproportionate cost of the policies. Where any doubt or confusion exists in this respect, one should consult an independent insurance broker for advice.

Another danger of loans is in the choice of loan provider. There are of course a great many loan providers, providing loans of different amounts, over different periods and with different interest rates and terms and conditions. If insufficient comparison is made between the loan providers available, one could ultimately pay considerably more for the loan over the full term of the agreement than would otherwise have proven necessary.

If financial hardship should unfortunately strike, for whatever reason, a very real danger of loans is that defaulting on the monthly repayments could affect one’s ability to obtain credit at a future date, even after the difficulties have long since passed. If the financial hardship is so severe that the loan provider successfully brings legal action due to non-payment of the monthly subscriptions, the effects of this on one’s credit file could be profound for years to come.

There is no way to successfully eliminate the danger of loans altogether but by exploring one’s options in full prior to making any application, considering any likely changes in one’s personal life circumstances during the term of the loan and reading all the small print on the loan agreement in full prior to signing it, the dangers of loans can at least be kept to an absolute minimum and the likelihood of difficulty being experienced significantly reduced.