Thursday, August 7, 2014

When Not to Take Out a Loan

Payday Loans
Payday Loans (Photo credit: Thomas Hawk)
A payday loan can be a wonderful thing. Whether you’re using it to pay a bill and avoid late charges or interest fees or to provide for your family until that next paycheck, a payday loan is often a wise choice. However, there are some instances in which it’s simply not smart to take out a loan.

To begin with, you should never take out a loan just to take a vacation or to do something “fun.” Fun activities need to wait until you have the cash to pay for them upfront. Remember, loans are for necessities and smart investments, not for when you need a break from life. That “break” will catch up to you in the form of repayments.

You also should never take out a loan to repay money you’ve taken from your savings. Nine times out of ten, you’ll end up losing more than you gain.

In general, as long as you are smart and practical when you take out a loan, it’s not a bad decision. But if you’re being frivolous and not really thinking the decision through, then the loan probably isn’t a good idea.

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