Personal loans have been around for many years already. But in these modern times, they have become more important for everyone. Now that a personal loan application process has become easier, anyone will get the option for ‘near-easy’ money. After all, repayment is a secondary process that almost no borrower is worrying about. If you have this mindset, then reconsider!
Think about these aspects where personal loans fall short:
Financial independence is a broad concept. It covers all great aspects of personal finance, and it requires people to make huge sacrifices. If you’re gunning for financial independence, relying on personal loans is a no-no. Even though personal loans are appealing with low interest rates and manageable repayment terms, you’re still shelling out money. In the end, you’d have paid more than what is gained – unless you’ve invested the loan. It’s also better to think of the loan as an emergency solution.
For many borrowers, personal loans are little gifts of life. However, these people are unaware that personal loans affect your leverage. The payment for interest can be used for something worthwhile, such as a skill development course. Additionally, the mental stress of dealing with a collector is something that you don’t deserve. To make personal loans as leverage contributor, try investing it in something worthwhile like Bitcoin or virtual stocks. Never, ever, use the loan to buy a luxury item.
Personal loans fall short in terms of flexibility – no matter how flexible they appear to be. Why? The debt will give you little spots to maneuver on. Failure to repay on time will incur penalties and other disadvantageous fees. On top of that, your credit score might suffer. In turn, this will affect the chance of getting approved for better loans someday. To counter this, you have to look for ‘low responsibility’ loans. These can be quick cash loans, guaranteed loans, or even credit builder loans. As a rule of thumb, you should only apply for a personal loan if you have a continuous source of income.
Despite the negative factors of personal loan, or any debt instrument for that matter, it’s still a temporary financial solution that you can take. Before applying for a personal loan, make sure that you have a repayment plan. In this way, the financial damage is mitigated. You should also remember that proper repayment is your primary duty as a responsible borrower.