To Borrow or Not to Borrow: When Does Applying for a Loan Makes Sense?
Though it would be nice to always have money to cover the unexpected events in life, it’s not that easy. There may come a time in your life when you just don’t have the money. An unexpected bill, a loss of income, or even an emergency repair could put your budget out of whack for months. Naturally, when you don’t have the funds you need, you ask for a loan. Though loans can get you over the hump, they do have to be repaid, which is why making the decision to borrow should not be taken lightly.
Borrowing funds from a lending provider can get you out of a jam when you have no other way out. However, many people end up in serious debt. They either take out more than they need, don’t repay the loan timely, or didn’t evaluate the matter to determine if they needed a loan in the first place. To prevent this from happening to you, here are circumstances in which taking out a loan is a good idea and when it’s not:
When Taking Out a Loan Makes Sense
A bill being more than expected – Instead of the average $200 for gas and electric you have to pay $300. You won’t have the money until payday, but to avoid late fees and other charges you need to pay the bill in the next day or so. In this instance, taking out a loan makes sense. It allows you to avoid the penalties that would be implied by the service provider. Also, because you’re able to repay it around your next pay cycle, you won’t accrue too much interest on the loan.
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An unexpected emergency – Your car breaks down and you have no other means of transportation. You take it to the shop only to find that the repair is going to cost you $500. In this instance, taking out a loan might be your best bet. You can apply for a short term loan for $500 and pay on the balance over the next 14-30 days. This way you have about a month before you accrue too much interest but you still have your car to get where you need to be.
In this instance, it might also be beneficial to learn how to keep your car well maintained, such as these tips offered on the MaxLend Loans Twitter page. Doing so will minimize the chances of you needing a loan in the first place.
Let’s face it, there are times your bills are so costly you don’t have a cent left to your name. If you need extra cash to hold you over until your next pay, then this might suffice taking out a loan.
When Taking Out a Loan is Not Ideal
Now that you know when it is beneficial, let’s talk about instances in which taking out a loan is not a good option.
You’re in over your head – If you already have hundreds of dollars in debt, there is no reason to add a loan to the top of it. No matter how small the loan is, if you can’t afford to repay it right away, this will add to your frustration.
You can’t pay it back timely – Taking out a loan and agreeing to terms knowing that you can’t afford to repay is not ideal. The longer it takes you to repay a loan, the more of a financial burden it becomes for you.
You have other loans out – If you already have a financial obligation to another financial institution, adding another payment can cause more of a burden.
Do Your Homework
If you’ve decided that it is in your best interest to take out the loan, make sure that you do your homework. Not all loan companies are created equally and you want to do business with a reliable, reputable provider. Checking out the company website is one way to conduct research. The best information is often found on social media platforms, such as on this Max Lend LinkedIn profile. There you can review information about the company and also see how many others have used this service provider in the past.
When you need financial assistance, the most common solution would be to borrow the funds and repay them later. Though loans can be great tools for helping you when you’re in a jam, you really need to think it through before applying. Taking out a loan unnecessarily or without a proper plan of repayment in place could lead to increased debt, which is the starting point of a financial disaster. However, with a proper plan, taking out a loan could hold you over when you simply don’t have the means to do it yourself.