Who wouldn’t want a bit of extra money to get them through a tough period? Most of the time, our annual income just isn’t enough to cover our expenses and pay for creature comforts. There are times when we absolutely need to get something specific, such as a much-needed upgrade to our kitchen or a car replacement, but we can’t do it without saving up money for a long period of time.
But just because we need an urgent injection of cash, it doesn’t mean we can just take a loan out on a whim. There are many situations where a loan could put us into even more trouble, and the last thing we want is to have a debt that we can’t pay off. Take a deep breath and consider all your options before taking the plunge and applying to borrow money from the bank.
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Are You Financially Stable?
When you need a boost to your bank balance, it’s best to do it when you can safely pay it off. Consider if your current situation at work will continue and that you’ll keep getting payments from your employer. If they stop for whatever reason and you lose your job, then you could be in serious trouble. Missing monthly payments will negatively affect your credit rating, which will harm your chances of buying a home in the future or taking out further loans.
Always make sure that you can pay back the loan you take out. If you plan to take out unsecured personal loans then make sure you consult your bank or other reliable professionals to work out if you can afford to take out a loan.
Is It an Urgent Situation?
Take a moment to consider if the situation you are in warrants taking out a loan. Loans are big investments and they add stress to your daily life and expenses to pay on a monthly basis. If your car broke down and is beyond repair, then you can make an insurance claim assuming that it is insured. If you need a desperate upgrade to your home, consider if it’s actually mandatory or just a luxury that you really want.
We can avoid most of these “urgent” situations by planning ahead for them. Always insure your important items such as your car and computers, and make sure to look after them as well. If you’re tech savvy, you can save on repair costs by learning how to do it online.
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Are There Other Options?
Sometimes we overestimate the need for a loan. There could be other options available to you, such as selling some unneeded possessions (old electronics, clothing items, etc) for some extra cash. You could also ask for an advance from your employer, or consider taking on a separate part-time job to cover temporary expenses.
Taking out a loan should be considered the last resort and only used in an emergency. Never default to the loan as a means to splash out and buy loads of nice things for yourself or as gifts. Be sensible with your finances and anticipate times like Christmas by saving up your money and not spending too much beforehand.
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