When to take a Loan?
Many people will just take out a loan if they need money. However, it is good to think hard before doing so. Loans are supposed to be for when you need money in an emergency. If you have no money and you get a bill that has to be paid or your washing machine breaks down and you do not have the money for a new one, then it can be a good idea to get a loan. However, these days many people will get a loan because they want something that they cannot afford.
You need to remember that you will need to pay back the loan. You may have to pay instalments every month or you may just be charged interest until you pay it back. You may need to pay it back in a lump sum. Whatever the agreement, you need to be sure that you will be able to meet it. If you cannot do this, then it may not be wise take the loan.
If you just want some new clothes or furniture, then taking a loan for this, may not be a good idea. You may think that they are a bargain and you just must buy them, but the bargain may not look so good, when you add on the cost of the loan to the cost of the items. It could be a lot better to wait and buy it when you have the money, even if it is full price again by then.
Many people will borrow money on a spur of the moment decision. They think that they need the money and have no other choice and so go for it. However, this may be unwise and you should at least sleep on the decision. Think about why you need the money and whether you have any option to getting the loan.
There are some types of loans which are not designed for emergencies. These are student loans and mortgages. Most people cannot afford to buy a house outright, but they see it as a good long term investment. They take out the loan, thinking that the cost of the loan will be offset by the increase in the value of the property over the years that it is owned. This is probably true for most properties as house prices generally rise over the years and despite the cost of the loan and maintaining the property, a profit is likely to have been made. A student loan is used to pay for a degree course. This is a great thing if it means that the student can go on to working in a career that will pay them a higher salary than they would otherwise have received. It is like investing in a career. It also does not have to be paid back in full, if the individual does not get a job that pays more than a certain amount and it is written off after 30 years.
So basically, the times to get a loan out are if you are buying a house, doing a degree course or need money in an emergency and will be able to pay it back.