Should you use a Loan to get Extra Money?

Many of us struggle to make ends meet form time to time and so we may all consider whether it is worth getting a loan at these times. There are lots of loans out there but most of us would be able to borrow money in one way or another and so it is a very real choice for a lot of us. It is worth making sure that taking a loan is a good idea though, before you do so.

We borrow money for all sorts of different reasons and it is wise to make sure that we are borrowing in a sensible manner. Whilst borrowing can be extremely useful in some circumstances, it is also possible for us to get into trouble with borrowing. Therefore it is important to have a sensible approach. Being scared of borrowing can be as detrimental as borrowing too much as you can limit your opportunities.

Many people will borrow money to buy a home. This will mean that they will have somewhere to live without having to pay any rent and with the stability of knowing that there is no landlord that can move them on. In the long run it can potentially save a lot of money, because although you will have to pay interest on the mortgage and to maintain the home, mortgage payments tend to be lower than the rent would be on the same sized property and therefore you start saving money right away. Plus once you have paid off the mortgage, although this could take thirty years, you will no longer have to pay anything on a monthly basis. Obviously you will have to pay out if the property needs any maintenance, which you do not have to pay if you rent, but this is still unlikely to be more overall than you would pay out should you be renting. The house will also be likely to increase in value over the years and so if you did sell it you would get back more than you bought it for or you could hand it on to your children so that they can benefit from it once you no longer need it.

This is an example of how getting a loan so that you can have extra money can really benefit you. However, there are times when it can be a problem. This can happen when you borrow more money than you can afford and you cannot make the repayments or if you keep borrowing more and more money on credit cards and only repay the minimum amount so that the debt builds up and up.

So whether you should borrow money is a decision that should not be based on whether you can afford the items that you are considering buying but more on whether you are in the right position to get a loan. You need to consider how having the items that you are buying will benefit you both now and in the future. You also need to think about the repayments and whether you will be able to afford them. Make sure that you find out exactly how much they will be and whether you will be able to afford them along with everything else that you pay out for in a month. If you are not sure, then you can look at your bank statements and add up everything that you spend and everything that you get paid and look at the difference. Also think about whether you normally tend to have some extra money left at the end of the month or whether you struggle to manage each month.

The decision can be difficult as there will be emotion involved as well how much risk you are prepared to take being a factor. Talk it through with others if you are finding it hard to decide as they may be able to see things from a different point of view. Make sure that you consider whether you have savings that you could use instead of borrowing, whether you can wait and save up for the items that you need to buy and whether you can afford the repayments. Think about the difference that will be made if you have those items and whether it is worth it; considering the cost of the loan.

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