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Loans are more freely available than ever before. Some companies offer emergency loans without even doing a credit check and without even asking for a purpose. The problem with many of these loans is that they come with a huge amount of interest. This can get people deep into debt, which may eventually become impossible to pay off. The key is to not borrow frivolously – there are times when you’re better taking the time to save up or considering leasing options. Here are several times when you really shouldn’t turn to a loan.
When you’re trying to pay off another loan
Taking out loans to pay off other loans is an obvious example of when borrowing has gone too far, and yet many people do it. Debt consolidation loans are an exception – if you’ve got multiple loans coming out and are finding it hard to keep track of these, a debt consolidation loan pays off these multiple debts, so you’re left with one big loan and one monthly payment. Such loans should be low interest when taken out from an honest lender.
When you’ve got a bad credit score
Another time in which you shouldn’t borrow is when you’ve got a bad credit score. Credible lenders with low interest rates generally will reject you if you’ve got a bad credit score. You’ll only be able to borrow from emergency lenders, and these loans will have a lot of interest attached, resulting in you paying more in the long run. Borrowing also further damages your credit score, which could deny you everything from private renting to taking out a phone contract to even getting hired by certain employers. You’ll find plenty of guides online on how to repair your credit fast. The only time you may want to borrow is when taking out a credit-building loan from a bank, designed to build your credit score.
When it’s for a holiday
Loans should ideally be to pay for necessities or investments. A holiday is a treat that you’re far better off saving up for. You’ll be paying off your holiday for months afterwards, which could lead you to regret it – and a holiday shouldn’t be something you regret. The only time you may want to borrow is if you’ve already paid a deposit and had budgeted but an emergency cost came up such as a plumbing repair or a funeral. That way you’re only borrowing money to pay off part of a holiday that you would have been able to afford originally (sacrificing the deposit could lose you more money anyway).
When it’s for an expensive dress
This is much the same principle as a holiday – expensive clothing should be a treat. There are now sites in which you can hire expensive clothing for a fraction of the price. If you’re going to a wedding or a party or a prom and you need a special dress, consider this as a more economical option.
When it’s for gambling purposes
Some people to borrow money to gamble with. Whilst you could win some serious money, you could also lose everything you’ve borrowed and then it will all be for nothing. Taking such a risk could be a sure sign of a gambling problem – you should never gamble with money that isn’t yours.