People often view loans as a last resort, particularly since Americans carry so much student loan and credit card debt, but it doesn’t have to be this way. When taken out for the right reasons and in moderate amounts, loans can allow you to pursue personal goals or handle a demanding crisis. So while you should avoid juggling multiple loans, those with minimal debt can benefit from borrowing small amounts. Here are 3 reasons a loan can be a good move for your financial future – and a few others that can spell disaster.
If anyone in your family has had a recent medical emergency, you may be seeing the bills pile up quickly. When this is the case, you might consider taking out a loan to prevent your account from going into collections. Dealing with a collections agency can be a nightmare and harm your credit, but a loan can give you the time you need to steadily pay of medical debt.
Be mindful about loans for healthcare, however – be sure to restrict this kind of borrowing to necessary care. Too many people take out loans for plastic surgery and other unnecessary medical procedures. Don’t risk ruining your credit by borrowing for elective procedures.
Manage Your Debt
When your credit cards approach their limits, you might seek some quick cash or look for a loan to consolidate your debt. Credit cards can force you to pay high interest rates, but if you bring your credit and other loans together under one larger loan with a lower interest rate, you can save a lot in interest payment. Stop paying extortionary interest rates and get a personal loan instead. Your credit score and your bank account will thank you.
It’s important that you plan this kind of borrowing carefully. If you find yourself facing big bills you can’t pay, don’t jump for a payday loan. Payday loans take advantage of people in desperate financial situations and charge exorbitant interest rates. You’ll do better to be late on a credit card payment and seek a proper debt consolidation loan than to buy into the payday loan system.
Building A Business
Do you have a growing small business? If you’re seeing significant returns from a successful independent business venture, a small business loan can help you expand your reach. Look for business-specific lending and borrow in modest amounts. Because you already have a successful business, you should have no problem paying back this loan.
Always do your homework before choosing a loan provider. You’ll want to compare interest rates to make sure you’re getting the best rate. Furthermore, don’t borrow more than you need to. Ultimately, your loan should allow you to handle your finances more responsibly, not force you into another difficult financial position.