When is a Personal Loan a Bad Idea

Embarking upon a personal loan in order to profit from or enrich your life is, in essence, an advantage to your financial portfolio. However, it is the reason for the loan, or indeed the source of the credit company, that determines when a personal loan for you is a bad idea.

Undoubtedly, many of us take out a loan for the purposes of car purchase or college tuition. These two large expenditures would be difficult for the average person to afford without some financial aid.

There are, however, many instances when a personal loan is, in fact, the wrong decision for you to make. With the current economical crisis and the loss of job security, many consumers are now experiencing problems with an ever increasing debt figure. Wishing to clear credit card debt held over several accounts, it would be a serious mistake to consider taking out a personal loan in order to reduce these balances.

In this buy it now, pay later world, far too many people are looking to purchase from their “wish list” with a loan. If that new plasma screen television or the latest cell phone is not within your reach this month, try working a second job in order to buy your “must have” item. Far better to pay in full, you may even be able to obtain a deal from the supplier for cash, a personal loan with interest will cost you far more and the payments could last longer than your new toy.

If you really are determined that you must sign up for a loan, it is highly advisable that you investigate your possibilities. Interest rates vary considerably from banks to loan companies. If you are refused by your bank and try elsewhere do not forget these applications are entered on your credit scoring record.

A word of warning for those who are feeling that the end of the month and salary paycheck time is a little too far away and are reading the enticing advertisements for payday loans. These are high interest, fast payout, cash loans and repayable in full at the end of the month. This is an extremely expensive way to raise some cash for a very short period of time and be careful, because of their very fast pay out direct to your checking account, you could one minute be considering the loan and the next second, it’s in your account and you are liable for interest charges.

With interest rates so high and the prospect of committing yourself to repayments for several months or even years, you must ask yourself if it really is imperative that you obtain some finance now. You would be well advised to look at your lifestyle in order to save on outgoings and by selling any unused personal belongings to raise some cash for yourself.