With the vast majority of products and services more expensive than they were a year ago, the budgets of American individuals and families are more easily depleted. Life goes on and doesn’t stop, let alone financially. You also can’t afford to let go of your aspirations and personal growth. A personal loan can be a solution or the beginning of a problem when you do not know when you should or should not apply for one. That is why we will tell you some circumstances in which in SoloDinero we consider that you could resort to these products or discard them to avoid indebtedness.
When to ask for a personal loan?
To begin with, we must remove the myth that asking for a personal loan is a negative thing. People of different economic levels, companies and even government borrow money all the time to pay for some of their needs. So when is it good to take out a loan? We have three situations.
1. Acquire something lasting
From buying a large and expensive appliance, through the acquisition of a car and even the purchase of a house, are some of the items for which it is a good idea to ask for a personal loan, since you know that they will last you more years of use than debt, and you can pay it gradually month by month.
2. Improve your situation
We think of a house again, because it is the greatest and most tangible reflection of personal improvement; but it’s not the only thing. For example, it is well worth asking for a loan to pay for university, a course or diploma that will allow you to improve financially, with higher income in the future. A loan can also help you finance an investment or a business of your own, giving you the chance to improve your income.
3. Save on interest
The interest on a credit card is higher than that on a loan. If you have high debt, you could consolidate it with a loan, and possibly have smaller one-time payments than you would have with plastic. The important thing is not to fall back into this dynamic to really improve financially.
When not to ask for a personal loan?
One of the keys is to know that there is good debt and bad debt. In the previous point we talked about situations in which you can generate good debt, because in the end, the financial result is going to be bigger. But a personal loan can become a bad debt if you incur the following three situations.
1. Shopping for a unique experience
The fact that many consumers incur a personal loan to make a trip and it seems customary, does not mean that it is the best. With these types of goals, it is preferable to save and enjoy, than to go into debt and continue paying for a trip from the past in the future.
2. They prevent you from saving
One of the tricks to avoid indebtedness and obtain financial freedom is saving. If you ask for a personal loan, it is difficult for you to pay it no matter how small it is and prevents you from creating an emergency fund and saving for retirement, then borrowing is not the best option. Never sacrifice your savings for low-interest debt.
3. Your purchase is very expensive
While we mentioned that asking for a personal loan to buy something durable, you should also know how to discriminate. It is not the same to buy a primordial appliance, such as a washing machine, to save time in washing your clothes, than to buy the latest iPhone just by presumption. Also, you should be aware of your monthly financial capabilities, because it is valid to need a car, but if you do not have to buy and pay for a new one, perhaps you should opt for a used car.