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Personal Loans: A Curse or a Blessing?

16 June 2015 No Comment

8 Unfortunate Events That Can Deplete Your Savings AccountUnfortunately, for cashless people – people who need loans the most – the loans they end up taking become a curse as they cannot repay them. However, this does not need to the case. Whether personal loans in are a blessing or a curse depend on the type of loan you take and the decisions you make when taking that loan. Here we will look at some factors to take into account when taking out a loan to ensure they do not become a curse.

Interest Rate

The interest rate of a loan will have a significant impact on the amount you end up repaying over the life of the loan, as well as the size of your monthly repayments. You can use a loan calculator, available online, to work out exactly how much you will need to pay monthly, as well as the total amount you will repay over the life of the loan, based on the capital amount and the interest rate. The lower the interest rate, the better off you’ll be. For example, payday loans are very short term loans and have such high interest rates that many people get into a cycle of being unable to repay the loan and needing additional loans. Loans such as car title loan have longer terms and lower interest rates. If the interest rate makes the repayment amount too high for you to manage, the loans can become a curse.

Repayment Conditions

The repayment conditions of the loan will impact your repayment ability. Some loans, such as car title loans offer negotiable repayment conditions to help you find a solution that will suit your financial ability. If the loan is inflexible in its repayment conditions it may not be suitable for you.

Capital Amount

The amount you borrow will impact how you manage the loan. If you borrow more than you need and more than you can repay, the loan can become a curse. Make sure you are realistic about the amount of money you need and borrow enough, but not more than necessary. Having more to handle than you can repay may result in you defaulting on your loan. If it is a secured loan, you will risk the collateral.

Financial Plan

In order to ensure the loan you take is a blessing and not a curse, you must have a financial plan for paying it back. Loans require monthly repayments and you need to be able to meet the repayments every month. Make sure you have a plan that covers these repayments before you take a loan. Work out how much you can repay each month and take a loan for an amount that works with your repayment abilities. If you have not worked this out beforehand, you will find yourself falling further and further behind, resulting in personal loans that are more of a curse than a blessing. This does not need to be the case if you have done your homework properly.

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