October 26, 2019

When is it worth taking a loan and when is it better not to?

Many people stigmatize loans and payday loans as a definitive evil that brings no real benefits. However is this really the case? Are the loans really bad? Nothing could be more wrong. Loans taken consciously and prudently can not only bring us material benefits, but also help to improve our life situation.

So when is it worth taking a loan?

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1. When a good opportunity hits

Sometimes there are promotions that are difficult to pass by indifferently. Discounted trip abroad, which you always wanted to go or home appliances that you just need, and which is available at an attractive price. But what if you don’t have any funds on your account? Count on the opportunity to happen again? If the total price of the offered product is a bargain, and we have the opportunity to take a loan, which, even taking into account all the costs is favorable, then there is probably nothing to wait for. A similar promotion may, of course, hit, but what is the guarantee that its terms will be equally attractive?

2. When we invest borrowed money

Do you run your own business and need money for equipment that would allow you to expand your offer and increase your company’s turnover? Or maybe you would like to invest in yourself and broaden your competence by enrolling in a training course, studies or learning a foreign language? In both cases, the losses you incur when taking out the loan are temporary. The costs will be more than paid back as soon as your investment starts producing the first results – your business will start earning more or thanks to your new abilities you will get the expected promotion or get a better paid job.

3. To deal with emergencies

Crisis situations require the use of ad hoc measures. Unfortunately, unforeseen problems usually fall on us when we are completely unprepared for them. Sudden illness, flooded ceiling, car repair are just some of the cases in which you should not delay taking a loan. Most loans and payday loans in the UK are deposited directly on the borrower’s account even within 15 minutes of the loan being granted. Thanks to the quick access to cash, you can deal with your expenses instantly and without stress. What’s more, thanks to the fact that the entire application process is carried out online, you can apply for payday loans at any time of your choice and from any device.

4. When you need to ensure liquidity

If you are a freelancer, work in the construction or renovation industry or your business is only seasonal and you need cash, a loan will be the right solution for you to get financial support. Instantaneous pay will provide you with access to funds when your industry has a “quiet period” or when your employer settles with you periodically. You will be able to settle your loan the next time you withdraw. What’s more, people working in the construction industry, transport, casino, pawnshop or people running seasonal activities may have trouble getting a traditional bank loan, as banks treat these professions as “high risk professions.” In the event of financial difficulties, the loan will therefore be the most reliable financial assistance available.

5. When the bank refuses to grant you a loan

Banks often set high standards for borrowers, which are difficult to meet. If you need cash to deal with temporary financial problems and a bank loan is not a viable option for you, then taking a loan will be an effective solution. When can you have trouble getting a loan from a bank? Receiving a loan may be a problem for people who are not employed, work in one of the high-risk professions, are employed on a fixed-term contract or a mandate contract, or who have just started work and are on probation. If any of the above applies to your current professional situation, a loan will be the most appropriate form of lending for you.

When is it not worth taking a loan?

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1. When we have other loans on our account

Taking another loan can drive us into a difficult spiral of debt. If our financial problems are not short-term but long-term, the loan will not be a good solution. If you have several loans to pay at once, it would be better to take a consolidation loan that would combine our debts into one loan with an extended repayment date and a smaller monthly installment. However, before you decide on the next step, talk to your financial advisor. Many government websites or charities offer free financial advisor support. Thanks to the adviser you will learn how to best deal with your financial situation.

2. When our financial situation is unstable

If you know that your financial situation may change in a short time and limit your access to financial resources, do not decide to take out a loan. The loan is repaid in fixed monthly installments, so if you suspect that you may have a problem with regular payment and regular debt repayment, payday payday will not be the right solution for you. Before you decide to take a loan, analyze your situation and look at your household budget. You should consider a loan only if you are sure that your monthly installments will not overstress your home budget and will not be a problem for you. Otherwise, defer the decision to incur debt until your financial standing stabilizes.

Borrow with your head

Loans and payday loans are not inherently bad. Taken judiciously will bring us more profit than damage. You just have to approach them “with your head”. First of all, when choosing a loan, follow three principles:

  • borrow when it’s worth
  • borrow if you are sure that you can manage paying off the debt
  • loans when the loan is available on favorable terms