Borrowing money – When is it bad?
Sometimes it is actually better to refrain from borrowing money altogether. It is usually about situations when you can’t really afford to borrow, or when a loan is probably not the best solution to the problem you have.
Don’t have any money at the moment but feel the urge to buy that stylish jacket you saw on the town or a new mobile phone? A loan can be a way to get the money for this and it doesn’t have to be bad, but when you take out a loan of this type you should always remember that it is soon time to pay back again.
Do not borrow money unnecessarily, it costs money
Make sure you actually have the money to pay back in a month or when it might be time to pay. Small loans are also relatively expensive so think about if it might be better to wait for the purchase until you have received your salary or other money in the account.
It is only you who can say for yourself if what you intend to buy is unnecessary or not. That jacket may well be okay to buy if you have money for it but if you need to borrow for it then it is more doubtful. But do you think it is worth buying even if you have to borrow for it, then there is no question to take so much into account.
However, should you be doubtful whether your finances are able to borrow, the general answer is that you should never borrow money if it increases costs. Exemptions when it comes to loans are a collective loan that we will cover in the next section. Borrowing for clean consumer goods should never be done if you have poor finances where it is doubtful if the extra expenses can be met.
Do not borrow to cover expenses
If you already have debts and have trouble paying them, it is usually not a good solution to take more loans to cover the costs. You can investigate further if you could do as suggested on the Loan Money page – When is it good? (and try to get a big loan that you can use to pay off your small loans), but it is a more long-term plan and requires you to get a large loan with good interest rates that cover all your current loans.
Taking a smaller loan and then using the money to pay interest costs for old loans is not good as it may solve the problem right now but it also means that you get even more costs for next month. The risk is then very high that you end up in a downward spiral that can end very unhappily.
It is important to borrow properly – and for the right reasons
It is not bad to borrow money and in some cases it is said smart or even necessary. There are good situations to borrow and there are less good ones, and it is important to make an objective assessment each time to determine whether the loan you are considering is reasonable and useful. If you take the time to research the alternatives and what they mean, you will certainly be able to make better judgments.
The Internet works very well in gathering information and comparing loans. If you have a good understanding of all the costs involved and know how much your loan will cost you in total, it is clearly easier to determine if you can take out the loan. So you should not give up, but think carefully before deciding.