Should I Take a Loan in 2021?

The situation with loans is always ambiguous – some people believe that it is worth taking them out, and this is extremely convenient. Others are afraid of the “debt hole”. The truth is somewhere in between.

So how do you decide whether to take out a loan?

• Decide if you really need this money. A sudden breakdown of the refrigerator, stove, emergency health problems, a completely empty refrigerator with a delay in wages may seriously affect your life. But borrowing $1,000 to renew a wardrobe is definitely not a good option. It is better to gradually buy everything you need, or at least use a credit card;
• Assess your salary. Do you have a stable income + a constant ability to save a little more than a monthly payment? You can think about a personal loan. Do you have a sufficient income but your paycheck is often delayed? Better choose a credit card with a grace period of up to 120 days. Do you need a small amount and expect to get your next paycheck in a few days? A good option would be a payday loan. Do you need a large sum and your wages are either sufficient nor stable? Do not take a loan under any circumstances. Look for any other ways, just do not get into a hole in debt;
• Assess the possible risks. There are always risks, even if you have excellent health and 10 years of work experience. What happens if you get seriously ill? If you get fired? Are there any unexpected expenses? Consider a contingency plan. Otherwise, loan repayment will turn into a real stressful sprint;
• Assess your opportunity to cut spending. This is the first step you can take when your income is unexpectedly cut so you don’t delay your monthly payments. The main mistake of 90% of people deciding whether or not to take out a loan is to calculate the amount right next to it, so that it will be enough for a more or less adequate standard of living + payments. As a result, as soon as something happens to income, it turns out that you cannot save any money.

Pros and cons of loans

To understand whether it is worth taking a loan, you need to compare all the pros and cons for the borrower.

Cons

• you repay more than you borrow;
• delay in payments leads to fines / penalties;
• if a loan is secured, you can lose property;
• if you have debts, you may not be able to travel abroad;
• the need to pay off debt is stressful;
• you have to save / reduce the standard of living;
• it may be difficult to change jobs due to the need to make payments every month.

In general, 90% of problems with a loan are associated with the need to pay a certain amount every month. Inconvenient? Yes. But let’s take a look at the pros.

Pros

• you can improve the quality of life without the need to save money;
• you can improve your credit history by repaying your loan on time;
• you can save through buying “here and now” at reduced / promotional prices;
• you can reduce stress about the inability to live in comfort / space / get the necessary education, etc.

In general, when thinking about whether to take a loan, you need to understand that this is an opportunity to dramatically improve living conditions, to buy goods at a reduced price. By the way, often the benefit from the discount overlaps the bank’s interest rate (for example, if the discount is 30-50%).

4 unexpected reasons why it is worth taking out a loan

1. Easier with work. Now employers have begun to check the credit history of employees. It is believed that a person with a good credit history is more reliable and predictable;
2. Easier with car rental. It is becoming a common practice to arrange a car rental with … a credit card. This kind of “safety net” is also considered a way to ensure the reliability of the client;
3. Easier housing. When it comes to personal loans. It is almost impossible to get a mortgage loan without a good credit history. There are several banks with a high chance of approval. But for approval, you will have to provide a lot of documents. It is much easier to take out and repay a couple of small personal loans on time;
4. Easier to help. In the past few months, banks have begun to tighten the screws, and even a co-borrower might turn out to be unsuitable without a credit history. This is especially offensive if, for example, spouses expect to get a mortgage instead.

Interesting fact

Despite the crisis, according to the official statistics, in 2021 Americans have taken loans worth about 27 trillion dollars.

Most often people took out loans for:

• medical treatment;
• repairs;
• buying a car;
• buying household appliances.

10% of them used a loan refinancing option to pay off existing debts.

Is it worth taking a loan NOW?

To find out if it is worth taking out a loan now, answer a few short questions:

1. Are your earnings stable now?
2. Are there open loans?
3. Do you need to pay rent / fines / taxes?
4. Do you expect large spending in the near future?
5. Is your health stable?
6. Is it possible to spend a certain amount on monthly payments?

Have you answered “yes” to most of the questions? Then be sure to evaluate the necessity, safety and profitability of the loan offer – and if everything suits you, you can safely apply.

How to take out a loan correctly

Are you get lost in a variety of loan offers? We have put together a few simple guidelines.

• urgent purchase / spending up to $1,000 – online payday loan;
• household appliances are broken / need to change wardrobe – credit card;
• one-time expenses in the amount of more than $2,000 rubles. – personal loan;
• spending over $4,000 with a refund within 2-3 months – a car title loan;
• purchase of real estate – mortgage.

Be attentive in financial matters, and then a loan will not be a burden but a convenient way to improve your life quickly.