It is not wise to use a useful thing for an unnecessary purpose. The Actual Role Of Loans Is To Serve the Need And Not the Greed. Nowadays, people are consuming loans and online borrowing mindlessly. The researchers of Newcastle University have expressed concern about this. They said ‘a ban on online borrowing – primarily through payday loans – between 11 pm and 7 am could protect consumers.’ These are the super speedy loans, which make the availability of funds so easy that people borrow them for just any reason.
This raises the concern on financial habits. Usually, during the time when people relax and get relieved after the stressful day, such things happen. The inclination towards mindless shopping and borrowing funds is intense as this gives them relief from the chaotic schedules. However, no one understands its later consequences and becomes the victim of the spiral of debts.
This is not the case with the payday loans only, but for every type of loan especially of short-term nature. Today, everything is available on instalments and for every small thing, there is a loan. Whether it is a mobile or a car, plenty of options are available in the loan market. Put your finger on anything and there is certainly a loan deal precisely designed for you. Not bad, just go for it, but why not first think on its varied aspects.
There is certainly no need to say good-bye to loans but a change in approach is necessary. A feel of responsibility in money matters should always be there. Apply and borrow funds, but do not forget to pay attention on several facets.
- First and foremost – Never borrow more than your repay capacity
The precious advice of the older generation still has a meaning. Cut your dress according to the cloth. A loan should not dominate your repayment capacity. There are advisable limits for every loan product – for instance – instalments for a car loan should not be more than the 15% of income, similarly set 10% limit for the personal loan and in total, the loan obligations should not exceed 50% of your total income. Just as you try to maintain a work-life balance, in finances, income-outgoing balance is necessary.
- Keep the tenure as small as possible
This may sound like a taboo, as usually, the concern is to keep the tenure as long as possible to get smaller instalments. But try to see the other side of the coin. In the long tenure, the interest outgo is always high. This increases the total cost of the loan, leaving a long-term impact on your finances. Wise thing is to get a short tenure according to your affordability and get rid of the obligation as soon as possible. Why hamper financial freedom with extended durations of debt? Repayments block a certain amount for a certain time period, which restricts the liberty to take financial decisions smoothly. Usually for bad credit situation, lenders offer funds with very small tenure. For instance, the 12 month loan bad credit no guarantor direct lender in the UK is the perfect example. This is because these are the specialised loans that help people improve credit rating through personalised pricing. Once the purpose solves, the duration is over. Apply same thing in every loan whether you have a bad or a good credit rating.
No matter if you like it or not but you have to keep a definite part of the earnings for the loan repayment. Why not make things easier with shorter durations of loan? It is always a better idea. Isn’t it?
- Do not borrow to invest or splurge
Loans are not toys; use them for a serious and genuine purpose and not for a desire or an experiment. A deep and long pending desire to go on a foreign trip can make you borrow funds. But if this is something you are doing on the cost of financial stability for a very long time, then wait and give it a second thought. Do not get driven by the materialistic greed, buying a car is fine but a luxury car may act heavy on finances later. Another point comes about investment, which is an uncertain thing. You may or may not get the due return. Do not take a loan to invest. For that, rely more on the savings but that too with caution because savings are the result of your hard-earned money. Just make sure whatever you do; all the consequences come into consideration.
- Rate quote is decisive
Whatever is the reason to take a loan, whether a desire or a need, forget not to look for the cheapest rate quote. The interest rate is the driving factor and affects the total cost of the loan. Search as much as possible, do not feel lazy to go deep and bring out an affordable deal with the lowest rate quote. Do not miss to compare. APR, tenure, repayment plans are the major factors that differentiate one lender from the other. Bargain wherever it is possible but do not get unrealistic, the lending market has some guidelines and rules that cannot change for anyone.
Every step demands caution in financial life. There should be no space for careless and off-hand decisions. Loans are the lifelines but as life cannot bear risks repeatedly, you cannot be inattentive with loans.
Borrow wisely, repay on time and live smart with stability in finances.
Loans are not like daily routine products, take them for actual reasons and not just for any random desire. Know the tips that help prevent careless decisions while taking a loan. Follow them and stay away from the vicious circle of regretful financial situations.