Should I take out a Loan if my Bank Offers one?

Often a bank that you are a customer of will offer you a loan. They may send out a leaflet with the details, a direct letter, email or even telephone. It can be tempted to think that you should take this opportunity of having some extra money and take out the loan. However, this could be a decision that you regret.

It is easy to think of a loan as money for you to spend on whatever you wish. That this is a gift from your lender that you can enjoy and spend on yourself and have a treat and so you should take it as you may not get offered such an opportunity again. You may feel that if you turn it down that they will not offer you a loan again, but actually this could be a good thing and is actually unlikely anyway as they want to make money from you if they can do so.

Taking a loan like this can be a big mistake though. Think about why the bank is offering you this loan. It is because they will make a profit from it as they will charge you interest and possibly fees as well so you will pay back a lot more than you borrowed. The amount that you pay in fees will depend on the interest rate, the charges and how long you take to repay it. It is well worth calculating how much it will cost you and then you may decide that perhaps it is not such a good idea after all.

It is also wise to consider the payments. You will have to repay the debt, this may be in a lump sum, in regular instalments or when you want to. However your loan is set up, you will always have to repay it. This means that you need to think about how you are going to be able to do this. If you need to make regular repayments then you will need to have the money available to do this. If you are not sure if you will have this extra money then take the time to calculate the money you have coming in each month and the money you have going out and see whether there is any left that could be used to make the repayment. If there is not any left then it would be very unwise to go ahead with the loan.

It is also worth considering what might happen if your income suddenly reduces or your expenses rise or both. How would you cope with making the repayments in this situation. You may assume that your bank will be kind to you as they offered the loan, but this is extremely unlikely. Take a look at the terms and conditions of the loan and it will tell you how much the fees, charges and interest is if you miss a payment or make a late payment. Consider how expensive this will be and how you would feel in this situation.

Do not worry that the bank may not offer you a loan again. It is up to you to ask for a loan if you need one, not the other way around. You need to consider your circumstances and whether it is the right time for you to get a loan or not. Think about whether you can justify the expense, whether you can make the repayments and whether you will cope should interest rates go up, your income goes down or disappears and if your expenses go up.

A loan should really only be taken out if you really need the money. Usually this would be in an emergency when you have no other way of affording something or need to buy an item in an emergency. Occasionally it might be to better yourself such as a mortgage or a student loan. However, they should always be taken out after a lot of thought and consideration and to buy something specific. Just borrowing money because you are offered it can be needlessly expensive and lead to stress and therefore should be avoided completely. If you can manage without a loan, then do so!

Should I get a loan to pay for a new mobile phone?

Many people like to upgrade their mobile phone regularly so that they can keep up with the latest fashions and technology. However, some phones can be extremely expensive and it can be really costly doing this. You may find that you do not have the money that you need to afford the phone but you really want it and so you want to borrow the money to be able to get it.

While borrowing can seem like a really easy answer it may not be the wisest choice and so it is worth thinking about the consequences of taking out a loan before you do so. It is easy to focus on how great it will be to have the phone without considering what might happen with regards to the loan.

When you borrow money you will have to pay for the loan. It is easy to forget about this cost and the fact that it will make your purchase more expensive than the ticket price. It is therefore wise to calculate the cost of the loan before you take it out so that you can work out whether you are prepared to pay that much extra for the item that you are buying. It may not seem like that much extra, but think about what you could do with the extra money.

It is also extremely important to consider the repayments on the loan. Whatever type of loan you get, you will have to repay it at some point. This means that you will have to find the money to pay the cost of the phone as well as the cost of the loan. This could be quite tricky and could even mean that you will have to go without other things to afford it. Make sure that you are aware of when the repayments will be due and how much they will be before you sign up to the loan. This should help you to be able to know whether it is something that you will be able to afford. Do make sure that you know what your monthly incomings and outgoings are so that you can calculate whether you will have enough money left to be able to afford these repayments.

Some people find that once they have a debt then they begin to feel stressed. They worry about the cost of the debt and how they will be able to repay it. They think about the fact that they owe someone money and do not like that feeling. They worry about how they will be able to ensure that they have the money to repay, perhaps in case they lose their job, have extra bills to pay or whatever.

It is really wise to consider what might happen should the interest rates go up as well. It is likely that the loan will become more expensive and you will need to find more money for the repayments. You may find that other bills get dearer too and so you may need even more money to be able to pay them all back. It is also wise to be prepared for a situation here your income falls or your outgoings increase. This could happen at any time and it can then be very difficult to manage your finances. Think about what you can do to plan for such an occurrence and whether you would actually be able to cope at all in this situation. If you have to miss a repayment it will mean that you will take longer to repay the loan and will have to pay charges or fees and possibly even higher interest and so the consequences can be extremely expensive.

Getting a loan should never be a quick decision. It is wise to make sure that you think hard about the additional cost, whether you think that they offer good value for money, how you will cope with the repayments and what might happen if you cannot make a repayment. It is worth taking your time to consider the situation and whether you think that the loan will be a sensible idea for you or if it will be better to not get the new phone and avoid the loan.