Everyone has heard of a loan before and knows, vaguely, what one is. You borrow money, then over time you pay it back with added interest. But, when are people most likely to take out a loan? Here are some situations where you might find yourself needing a loan:
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Buying A Car
There are so many ways you can finance your car these days. Most dealerships will offer you lots of options when you go to pay. A lot of people, particularly first-time buyers, will opt to take out a car loan. This is a personal loan that you get, specifically to help pay for your car. It’s one of the more popular ways to finance a car because it’s easy and affordable.
Most people prefer to get a loan out when they buy a car, rather than go for a rent-to-own plan. With a loan, you can get good interest rates from your bank, and the process is quick. Also, you don’t have a set time frame that you have to pay the money back by.
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Buying A House
There’s a big chance you’ll take out a loan when you go to buy a house. Whether it’s your first house or just a new one, most people need a loan. The problem is that home prices are so high, most of us can’t afford to pay outright with our own money. So, we take out a mortgage, but that still requires you to put a deposit down. Many people will take out a loan to be able to put down the deposit and take out a mortgage.
Also, obviously, a mortgage is a loan in itself. When you take out a mortgage from a bank, they’re basically paying for your home. You then have to pay back the mortgage over time. So when you’re buying a house, you could end up taking out more than one loan.
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Pay The Bills
Commonly, people take out a loan when they’re short on cash. When you need to pay for something, but can’t quite manage it at the time, you get a short-term loan. You’ve probably also heard of the term ‘payday loan’ too. These are short-term loans that are meant to help people cope, financially, until they get paid. Normally, people will take these loans out if they have bills that need paying. It can help out a lot of people who are in a tough financial situation.
But, the issue with short-term loans like this, are that they have very high interest rates. If you don’t pay the loan back quickly, then you’ll end up having to pay far, far, more than you borrowed. Sadly, lots of people can’t pay the loans back quickly, so end up in more financial trouble than they started.
There’s nothing wrong with taking out a loan; sometimes they can be a great help. The important thing to remember is to check the interest rates beforehand and only borrow what you can afford. Try and find a loan with the lowest interest rate possible, it will make it easier to pay back.