The global economic downturn and credit crunch has placed a large number of people under great financial pressure. Many are seeking loans to help give them short term respite from current money worries.
There are simply thousands of loan providers advertising in the press, on TV and online that they can help the desperate with quick loans. However, you should consider the long term consequences of taking out a loan and indeed whether you really need a loan at all.
Everyone’s financial circumstances will be different, so your first step should be to get a firm understanding of your current monthly outgoings and your current income. Without clear knowledge of your finances you will not be able to make an informed decision regarding whether taking out a loan is necessary and sensible.
Firstly, if you’re thinking of taking a loan to purchase something or perhaps take a vacation, think long and hard about whether you really need to buy that item or whether a less expensive UK based vacation is more sensible given your financial situation.
If you’re seeking a debt consolidation loan for existing debts, try to find a provider that can give you a longer repayment period, which will reduce the amount of your monthly repayments. Although you may have to pay more in the long run due to interest, the reduced monthly repayments will alleviate some financial pressure.
Unsecured loans for smaller amounts of money can help in the short term, but you must make sure you can keep up with the repayments, as penalty fees will only deepen your debt. Relying on loans can lead to the formation of bad borrowing habits. Consider whether you can save money by reducing your monthly spending in other ways before conducting research into the best loan deals available. There are even such things as zero percent loans.
Larger loans will usually be secured against your home or another type of property of substantial value. In the current climate this type of loan requires incredibly careful consideration and accurate budgeting before you sign any agreement.
Can you definitely keep up with the loan repayments? Is your job secure in this tough time of widespread job cuts? If you suddenly lose your job and still have a loan to repay you will be in an extremely difficult situation and could lose your house if you cannot keep up with your repayments.
Naturally, you must discuss any loan you’re considering with your spouse or partner, as they will also be liable for any debts secured against your jointly owned property. Financial difficulties can cause immense stress within relationships, so be sure to discuss all your financial arrangements in depth with each other.
If you have a good credit rating you will be able to secure a loan easily, but if you default on repayments for whatever reason, your credit rating and financial situation could turn bad very quickly.
Everybody’s financial situation is unique, but the current harsh economic climate means no loan should be taken out without serious consideration and planning. Get a good grip on the financial situation of your household, your income and outgoings, and think hard on whether the loan is absolutely necessary. If you ask me,saving for things like a house or car etc. is a much better option.
So, have you taken a loan out recently? Or, are you planning to do so?
This post was provided by Epiphany.