Personal loans are widely advertised on the radio and TV these days. The ad says you can borrow up to $30,000 and have it in your bank account by the end of the day. All you have to do is go on their website and fill out a few forms, or make a short phone call. It sounds too good to be true, and in many cases, it is. A personal loan can be a great financial tool, but here are a few reasons why a personal loan may not be right for you.
You Can’t Stop Spending
Credit card interest rates are making your bills impossible to pay. You decide to take a personal loan at a lower interest rate to pay off those credit cards. This can be a sound financial decision for some people. For others, being free of credit card debt is like a signal to start spending. Before you know it, you have maxed out your credit cards again. Then you end up paying off those credit cards on top of a personal loan, making your situation worse than it was before.
You Should Be Saving, Not Borrowing
Some people will take a personal loan for an expensive vacation, desired home repair or even a wedding. A personal loan might seem like a quick and easy solution when your savings doesn’t quite cover the cost, but it’s probably not the best choice. You’re essentially paying interest on your vacation or wedding. Even a home repair that may increase your home’s value is unlikely to recoup the interest costs. It’s generally a better idea to keep putting money away until you can pay for these luxuries outright.
You Can’t Afford to Pay for the Personal Loan Either
For some people, taking out a personal loan to pay off high interest credit cards makes sense. But if you’re unable to pay the loan payment on that personal loan, you’re not making any progress toward debt relief. Just as with credit cards, missing or being late on personal loan payments will negatively impact your credit score.
If you’ve taken out loans and you need help figuring out when to go from here, contact us at Mid America Debt Relief for a free consultation. We can help you with the next step.