When and When Not to Borrow Money

People have been borrowing money since it first came into existence. People borrow for a variety of reasons — some good and some not so good. In ideal cases, however, people borrow because of what they need as opposed to what they want. Borrowing money responsibly is a good practice. You should never do it on a whim or because you want to make a frivolous purchase. And by all means, you should understand the terms of the loan and be in a position to pay it back in full.

Loans don’t have to be a bad thing as long as you’re taking out one for the right reason. If you have something like a pressing bill, or you need it for a school expenditure or maybe your child has an emergency, a loan is okay. But if you’re getting a loan because you want to go on a shopping spree or buy the latest video game, you should rethink getting a loan. Taking out loans to satisfy spur of the moment whims is not a good idea. You can find yourself in an even deeper hole you were in. It’s like the old saying goes, a fool and his money are soon parted.

One of the biggest mistakes people make when getting loans is choosing the wrong lender. There are a number of sources you can use for loans. If your credit is good enough you can go to a bank and get a short-term loan. If credit is less than perfect, consider payday loan alternatives provided by online lenders.  Unlike traditional payday lenders, which expect the money paid in full on the agreed due date or else the interest rate skyrockets, these loans are paid back in reasonably sized installments spelled out in plain language by the lender.

In fact, standard payday loans have been outlawed or heavily regulated in many states because people were relying on them at an alarming rate. These loans charged up to 300% or more in interest and were nearly impossible to pay back. With that said, recent surveys conducted by several polling firms have consistently cited statistics which reveal most consumers approve of these loan options being available on the free market. Furthermore, the majority of those surveyed said they fully understood the terms of such loans and still considered they valuable loan products.

The bottom line remains the same: loans should only be taken if truly needed. Borrowers should take into account how their credit rating could potentially suffer when they take out needless loans. The rule of thumb is you should only buy what you can afford. And you should only get a loan for things you need, as opposed to the things you want. Make sure your loans are for justifiable purchases. Make sure the terms are something you can handle. This means you are given an acceptable number of months to pay back and the interest rate is something you can afford.

Remember, borrowing money for things you do not need can leave you even worse off financially than you previously were. Always be responsible with your money. And never borrow more than you can afford to pay back.