When To Borrow A Personal Loan And When Not To Borrow One
If you are in debt, and almost everyone is, you probably open your mailbox every day to find it full of advertisements for personal loans. Don’t be so quick to fall for those loan offers that flood your mailbox, though. Some of them are outright scams, despite recent regulatory efforts to stop false advertising in the financial products industry. Even if the loans give you the interest rates that the advertisements promise, you should think twice about whether you need the money. Don’t borrow money unless you are sure you need it, especially when you will have to pay it back with interest. Since they are unsecured, personal loans are less risky in certain situations than loans that are secured by assets that you risk losing if you default on the loan, but whether the interest rates on the personal loan are a good deal depends on what your alternatives are. A Miami debt lawyer can help you decide whether a personal loan is the best solution to your debt problems.
Take Out a Personal Loan to Buy a Long-Lasting Asset
It can be a good idea to borrow a personal loan to make a major purchase if you are certain that you will get many more years of use out of the asset after you have finished paying back the loan. For example, you might use the personal loan to buy new appliances for your home. Some people choose this option when they do not have enough equity in their homes to qualify for a home equity loan or when they do not want to risk losing their houses if they are unable to pay back the loan.
Take Out a Personal Loan to Start a Small Business
Another good reason to borrow a personal loan is if you plan to use it toward income-generating activities. For example, perhaps you do not have a long enough credit history or business experience to get a small business loan, so you choose a personal loan instead. Perhaps you only need a loan in an amount smaller than the smallest business loan, and you are choosing to minimize your financial risk.
Take Out a Personal Loan to Consolidate Your Debt
One of the most common reasons that people borrow personal loans is to consolidate their debts. The interest rates on personal loans are lower than on credit cards, so you pay less interest in total by consolidating your credit card debt with a personal loan. You can also use the loan to pay off medical bills or to pay down secured loans, so that you don’t risk losing assets you pledged as collateral or getting your accounts sent to collections.
Don’t Take Out a Personal Loan If You Can Avoid It
If the expense is avoidable, or if you can pay for it simply by cutting your expenses, don’t take out a personal loan. It is better to skip a destination wedding than to borrow money to attend one.
Contact a South Florida Debt Lawyer About Debt Consolidation
A South Florida debt lawyer can help you decide whether a low interest personal loan would help you get out of debt, or whether it would be a gateway to bigger problems. Contact Nowack & Olson, PLLC in Miami, Florida to discuss your case.