The Personal Finance Resource

Knowing When You Should and Shouldn’t Borrow Money

Are you currently facing a financial struggle that goes beyond the means of your paycheck? Everyone has been there a time or two in their lives. Unfortunately, you can’t predict or control when these things come up. You could be great at managing money and have emergency savings, but have something develop that costs more than you have earned and saved combined.

It is in times like these, you may feel compelled to borrow money. Though a convenience, borrowing money from a lender, isn’t something you should do without careful thought. The moment you accept the terms of the agreement and sign the contract, you are legally obligated to repay every penny. To ensure you don’t make matters worse, here are some factors to consider when deciding whether you should take out a loan.

It Makes Sense to Borrow When…

Sometimes you need a lifeline to tide you over until you get your hands on some extra cash. Below are a few:

You Have Room in Your Budget

Remember, when taking out a loan you do have to pay it back, with interest, within a predetermined amount of time. If you were to accept the loan, are you able to fit the payments into your budget without needing to borrow again until it’s paid off? If the answer is yes, then it makes sense to borrow the money.

Your Poor Financial Habits are a Thing of the Past

Everyone falls on hard times that can cause their credit history and spending habits to get out of hand. If you’ve learned from your mistakes, however, and have been diligently trying to rebuild your credit and adopt new financial habits, then applying for a loan makes sense. It can be difficult to recover from bad credit, despite your best efforts, there are alternative loans for bad credit to look into that offer personal loans of up to $2,000 to handle your situation.

It Doesn’t Make Sense to Borrow When…

Though you may be struggling financially and need a quick bailout, sometimes borrowing money from a lender can put you in dire straits making it an unlikely solution.

You Already Have a Loan

If you have to take out more than one personal loan to cover your financial problem, it may be best to avoid borrowing altogether. Unless you have room in your budget to afford the repayment amounts for all the loans you take out, this will only result in you defaulting on one or all of them.

You’re Deep in Debt

If you’re dealing with so much debt that you’re living paycheck to paycheck, you’re not going to be able to afford to repay the loan as required. Extensions, late payments, and defaulted loans only add to your debt resulting in a negative mark on your already tarnished credit history.

Loans are very convenient when you don’t have the money on hand to cover your financial problem. When deciding whether or not to take out a loan, be honest and consider the above-mentioned scenarios. If you’re in need, able to afford it, and are currently displaying positive financial habits, then borrowing could be the lifeline you need.

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