Many erroneously believe that loans are a last resort for those struggling to cover their monthly costs. They shy away from approaching lenders, frightened of spiralling interest and indebtedness, and in doing so limit their own financial futures.
In reality, loans can transform your monetary situation for the better. Most people actually use them to acquire something they couldn’t otherwise immediately afford, such as a car, a holiday, or a new piece of equipment for their hobby, which can then be paid back in instalments.
Seen like this, they don’t seem as scary, do they? In fact, for the financially savvy, they’re quite the opposite…
When to Apply for a Loan
There are lots of different types of loans around, from personal loans to guarantor options from companies like TrustTwo, which means that those who are on the hunt always have a selection to choose from.
But when, exactly, should you be applying for a loan? Most people take the plunge because they’re looking to obtain an asset that they don’t immediately have the funds for, whether this is a new car or a new handbag. The reasons don’t matter especially, provided that you know what you’re doing.
Ideally, you should only ever apply for a loan if you know that you have the capability to pay it back. This means that those who are short on money are not ideal candidates, whereas those who are financially stable with a steady income are far better suited.
The question to ask yourself is simple: do you have the capability to pay back what you borrow? If the answer is ‘yes’, then you’re in the right situation to make an application.
How a Loan Could Benefit You
The main way that a loan could benefit you is by providing you with an immediate lump sum of capital. This means that rather than spending all of your savings and leaving yourself struggling to manage from month-to-month, you can purchase your chosen asset outright, paying back what you’ve borrowed in affordable monthly instalments.
Let’s imagine, for instance, that you want to buy a car, at a cost of £5,000. If you have £6,000 in the bank and you spend the former on your chosen vehicle, you’ve taken away the safety net provided by your savings. If, on the other hand, you borrow £5,000, and pay it back in affordable monthly instalments, your safety net remains, and you only have to cover a nominal fee every four weeks to stay on top of things.
If you’re looking into your borrowing options, could a loan be the best choice for you?