Financial troubles can overwhelm you. Trying to live a normal life when you’re buried in debt is very difficult. Yet, your options for getting out of debt aren’t exactly risk-free. A loan could make things much easier for you by smoothing away difficulties and creating new opportunities.
The same loan could lead to your downfall if you lack the ability to repay it. You need to be smart.
Whether or not it makes sense for you to apply for a loan depends on your specific situation. Are you trying to lift a business off the ground? A business loan can provide what you need. Or perhaps you’re looking for a personal loan to cover expenses.
Here are some factors you should consider before borrowing money.
Is Your Situation Temporary?
Financial distress can give you tunnel vision. You may feel as though you would do anything to get yourself into a more comfortable spot. It’s possible that a loan could take you there. However, in some situations, your finances would have improved on their own.
It then becomes a question of time. How soon do you need the money?
Medical debt is one of the biggest reasons people get loans. You become sick or injured and it interferes with your ability to go to work and make money. Your medical treatment itself is expensive.
If you were injured due to another person’s negligence, you might be able to sue them for compensation. However, that won’t help you pay the bills while the lawsuit is unfurling. In that case, it might make sense to get a loan. You only need money for a period of time and you’re reasonably confident that you’ll be able to pay it back.
Don’t stop going after the people who hurt you just because you got a loan that eased your day-to-day difficulties.
“Because without full compensation, the system of checks and balances fails. Distracted drivers will continue to drive distracted. Arrogant companies will continue to put profit before the safety of our community and their own employees. Unqualified and overworked truck drivers will continue to imperil our families as they barrel through our streets daily to meet their unreasonable quotas,” notes Adams Law Firm.
“The callousness, indifference and selfish behavior will not stop until every driver, every company, every person, takes responsibility for their own actions and changes their behavior.”
There are two ways to view temporary financial struggles. Either they’re short enough that you shouldn’t get a loan at all, in which case you should work on your budgeting. Or, you can view the temporary nature of your struggles as encouragement to get a loan.
Will You Be Able to Repay It?
Predatory lenders ruin people by giving loans that the borrowers can never repay. The person becomes trapped in a cycle of trying to pay back the loan, perhaps even taking out more loans to cover the fees on the first.
You should never borrow money unless you’re sure that you’ll be able to manage the payments. Otherwise, you’ll just be making your problems worse.
If you borrow money from a friend or family member, you might get a more flexible repayment plan. However, if you don’t stick with it, you may have to deal with a ruined relationship. A professional lender won’t be happy if you miss payments but you won’t be putting a friendship at risk.
The average person searching for a loan doesn’t have a lot of options. You might be tempted into a taking a deal with harsher terms than you wanted.
Is the Expense Necessary?
Going into debt to pay for medical expenses is unfortunate, but often necessary. In such situations, getting a loan might be the only way you can survive.
Going into debt or getting a loan to pay for your wedding is very different. That’s because you have options. You can downsize your wedding and avoid owing money to anyone. If you do decide to take out a loan to pay for an unnecessary expense, make sure you read the paperwork closely.
It’s not always a bad idea. It could be that a certain style of wedding is very important to you. Most Americans have a car loan, for example. A car isn’t a strictly necessary purchase but the convenience is worth going into debt over.
The decision to apply for a loan is a serious one. It should only be made after a concentrated effort to look at alternative options has taken place.