Most financial gurus urge people to refrain from taking out loans, much in the same way that you would advise people against abusing their lines of credit. The thinking is – and rightfully so – you don’t want to encourage living beyond your means. You use credits and loans to help you invest in something that will help you in the long run – say, a college degree, or to pay for a new HVAC system at home. No one should ever take out loans or open extra credit cards simply to buy the latest fashionable handbag. While our materialistic culture encourages this, it’s not something you ever want to engage in mindlessly. That being said, taking out a loan is sometimes not only a good option, but necessary. There are different moments in life wherein you will need a bit of liquidity to get by, and that happens to us all. Here are a few reasons why taking out a loan is not always a bad idea.
Emergency Medical Costs
Even if you have health insurance, your deductible won’t pay for everything, unfortunately. Those of us fortunate enough to have health insurance know that if you end up going in for an emergency surgery that costs, say, forty grand, you may still be left with a six thousand dollar bill from the hospital since that’s typically the portion insurance companies won’t cover. There are also lots of people who don’t have insurance in this country, more than we care to admit, and who need to get treatment right away. In both cases, patients are stuck with nasty bills that charities aren’t always able to pay, and hospitals don’t care to waive. In these cases, taking out a loan with a low interest rate is the best option, especially if the hospital does not have its own payment plans. A personal loan will help get you out of this jam and will prevent a collections agency from haunting you every waking second.
Purchasing a Vehicle
For plenty of people, especially those who do not live in an area where the transportation infrastructure is strong, having a car is a necessity. In fact, the pandemic proved that having a car remains one of the most practical ways of getting out and about without having to take transportation and get stuck in crowded buses or trains. So, a car isn’t a luxury; it is a necessity for many people. But, they are also expensive. Loans are a good way to invest in a car, and it is easy to apply online for different kinds of lenders willing to offer amenable interest rates. Instead of having to make a down payment using a credit card with an unforgivably high-interest rate, or paying in cash that you desperately need for other things, taking out a loan is a smart idea.
If you have debt spread across several credit cards, or a mix of say, hospital bills, student loans, and credit card debt, then applying for a loan to consolidate everything is a good idea. Paying for everything separately means that you’re paying extra since the interest on credit cards tends to be no less than 17% annually. In some cases, you may be paying double what you owe. Therefore, taking out a loan to help centralize all the money you owe is smarter, and will spare you the pain of paying exorbitant interest rates.
Staying Away from Payday Loans
Perhaps one of the worst things out there preying on people struggling financially on payday loans. Payday loans aren’t monitored all too well, and some of them may be downright illegal in other countries. If you’re in an emergency, getting a personal loan instead of a payday loan will save you hundreds – if not thousands – of dollars in interest charges. The annual interest rate for a payday loan is actually almost four hundred percent, which is incredibly high. The maximum set on a personal loan is far different, and typically much lower. Since payday loans are so high in interest, it actually makes it difficult for many people to pay them back on time, which results in even more exorbitant late fees, and then people may find themselves having to take out another loan just to pay off the debt. This also murders your credit card. So, a personal loan is a far wiser choice.
Borrowing money fills many people with anxiety, which is understandable. At the end of the day, you are taking out money that needs to be paid back as soon as possible. However, if you are stuck, or need to finance a big purchase urgently for your family, taking out a personal loan is the best option to consider.