I love money. Sometimes, more than my boyfriends (lol). Okay, not more than my boyfriends but I do have a soft corner for it. And, I can’t stand when people misuse it.
Often I see people applying for loans without even seriously thinking about the pros and cons. Certainly, loans will help you buy expensive items like cars and homes. But, if you really don’t have financial means to pay off a loan, then I would advise you to stay away from it. An unaffordable loan will only sink your financial boat without even giving you a safety-valve.
Here are the 4 scenarios when you must avoid taking out a loan by all means.
The bank asks you to bring a co-signer
You know when a bank asks you to bring a co-signer? It’s when it doesn’t have any trust on your borrowing capability. Even if your bestie or parents are ready to be a co-signer, you shouldn’t take the money. Get the facts correct. You’re not eligible for the loan. This is the hard reality. So, it’s better you don’t borrow money. Rather, find out the reason why you’re not eligible for the loan. Fix your credit so that you can qualify for the loan on your own merit.
Tip: Leave friends out of this loan since you would probably ruin their credit as well.
2. You want to have a lavish wedding
Wedding is a lifetime event? Really? To me, it’s sounds funny especially when 50% marriages end in divorces. Plus, I really can’t understand the logic behind paying wedding bills for years. I mean, what’s the point of getting into debt after making the wedding vows? Besides, there is no guarantee for anything. And there is no guarantee for marriage as well. So, are you willing to spend a fortune just for one day enjoyment?
Tip: If you’ve the financial means to have a lavish wedding, then please have a modest wedding and save for your honeymoon. Don’t get married on other’s money and regret later.
3. Your credit is not in good shape
You can get a loan even when your credit is not in a very good shape. But, you’ll have to pay much more than people with good credit. Reason? You’re not a credible borrower. Banks will charge more and you’ll pay a bigger amount for your monthly payments.
Tip: If you really need a loan, save money and build credit simultaneously. Once your credit gets in good shape, apply for a loan immediately.
4. You want to pay for the much needed vacation
Oh! Every cell in your body is shouting “vacation, vacation and vacation”. Your mind and body – both are exhausted. But wait a minute, don’t plan for a vacation right now. If you don’t have money, then just postpone it. Vacation is for pleasure and fun. It’s the time to spend some quality time with your family. It’s not the time to invite financial stress in your life. So, unless you’ve the confidence to repay the loan immediately after vacation, it’s better to look for gateways that are very near to your home.
A few more words
Yes, you can obviously borrow against your retirement savings. But, there are some factors which you need to consider. For instance, how soon you can pay off the loan or when you’ll retire from job. There is another factor which you must consider and that is the purpose of the loan. If you wish to take out the loan for buying a house, then it is still justifiable. But, if you’re considering to take out the loan just to pay your credit cards, then please don’t do it.