The possibilities are truly endless when it comes to taking out a personal loan, but some uses are better than others:
The good …
Anything that will benefit your financial strategy in the long run – as long as it’s done sensibly – is a good idea. For example:
- Education. A student loan can significantly increase your future earning potential.
- Property. A mortgage loan that will help you onto the property ladder is a worthy investment, but it’s important to remember that there are endless costs associated with properties and you may find that you could do with some more for the ‘smaller’ costs associated with the process, too, such as surveyors’ fees. Environmentally-friendly home renovations that can save you money in the long term can also be a sensible path to take.
- Business. If you are setting up a new company or do not yet have a line of credit, a personal loan can help.
- Credit card refinancing. Personal loans often have lower interest rates than credit cards, so it’s definitely worth looking into this as a possible option.
The not so good …
Taking out to a personal loan which exists solely for spending on unnecessary expenses is not a sensible idea. Material goods and experiences are fleeting but the debt amassed by them can last a lifetime – negatively affecting any opportunity for savings or retirement. These can include:
- The average wedding costs £20,500 but this doesn’t mean you have to spend that! Taking out a personal loan for such a large expense will feel great in the short term but like the world’s worst hangover immediately after – and one that won’t get better with a cup of coffee and a greasy takeaway.
- It may be tempting, but if you’re a bit short on cash it’s probably more sensible to take the family somewhere in the UK as opposed to splashing out on a five-star luxury holiday that you can’t really afford – not to mention the added extras when you get there, such as food and activities.
Not sure whether or not you should be taking out a personal loan? Luckily for you we know just the people …!