Last Updated on Mar 30, 2020 by James W
Taking out a loan is a big decision. Sounds obvious, right? How many times have you heard that sentence before?
A lot of people out there have sworn never to take out a loan. It comes loaded with risks and obligations. The process itself can be stressful if you’re ill-prepared. But the idea of a loan isn’t something you should just dismiss. If the benefit outweighs the risk, consider it. There are too many potential scenarios in life that may call for some extra cash.
Adoption and child care
If you’re expecting a child, or are thinking of adoption. it’s vital that your home and finances are secure. The first few years of a child’s life are a lot more expensive that people sometimes think. There are a few expenses you may not have thought of. Sure, you’ve considered clothing and new furniture. But have you considered the additional cleaning costs? Or the cost of babyproofing your home? The medical expenses of giving birth in a hospital should also be considered. Financial assistance may be what your child needs to get the best start in life.
Medical care
Traditional health insurance doesn’t cover everything. In many countries you will find that it does not cover prescription drugs and glasses, or home and dental care. If you find yourself needing any of these things, then delaying their use is dangerous. Further health complications can arise if you don’t treat things right away. In this scenario, it’s better to borrow the cash you need rather than place yourself at risk.
Emergency funds
Here’s something you may not have considered. What about taking out a loan before you need to? It’s possible to borrow money that you then just keep around for emergencies. This may seem like an odd decision. But when you’re not in a rush to get money, you have more time to shop around for better, safer deals. When an emergency strikes you, you will have the money waiting. Trying to find a loan when the need is urgent means you may not be thinking as logically as you can.
Establishing a credit history
A popular reason for taking out a loan is to improve credit history. The key is to take out a loan you know you can afford. Then, pay it back over the course of six to twelve months. This will create a credit history. Banks will refer to this when you need to take out larger loans, or apply for credit cards.
Vehicular repairs
If you need your car to get to work, then keeping it functioning is crucial. If it breaks down, then taking out a loan to get it repaired asap might be a smart move. You should speak to your boss about other possibilities first, though. If you can work from home and pay for the repairs in a more gradual way, you may want to consider this.
Emergency funds
Here’s something you may not have considered. What about taking out a loan before you need to? It’s possible to borrow money that you then just keep around for emergencies. This may seem like an odd decision. But when you’re not in a rush to get money, you have more time to shop around for better, safer deals. When an emergency strikes you, you will have the money waiting. Trying to find a loan when the need is urgent means you may not be thinking as logically as you can.
Luxury?
One of the most popular reasons people cite for taking out a loan fall under the ‘luxury’ category. Holidays, weddings, high-end electronics and tickets for sporting events. If you’re considering a loan for these reasons, give it a second thought. Are you sure you need it? If you’re 100% confident you can pay it back, then go ahead. But make sure you’ve considered all your options carefully.
