Borrowing is something that most people do from time to time. Whether it is getting overdrawn at the bank, using a credit card, buying a home or a car or getting a personal loan, most people will have borrowed money at some stage. However, should we be wary of borrowing and are there some of us that should never borrow money?
Some people do find the idea of borrowing money extremely stressful. They worry that they have a debt hanging over them, stress about making the repayments and wonder what might happen should they not manage to make a repayment at some point. This sort of worry and stress can be really difficult to cope with. It can have effects on general life, making you feel unhappy and it can even have an impact on your physical health making you more vulnerable to illness. Therefore it is wise to think about how you will feel about being in debt and if you think it will be a source of stress, then it is better to avoid it if you can.
There are some people that get very carried away with spending money. They really enjoy shopping and spending and will just buy things for the sake of it. If these sorts of people borrow money they could end up borrowing more and more so that they can buy as many things as possible. This could lead to a huge debt that could take a very long time to repay. They may even get into a situation where their monthly loan repayments are higher than their salary. Therefore if someone is like this then it is best that they completely avoid most types of debt so that they do not waste the money.
When you borrow money you have to repay it. Most debt requires a monthly repayment amount for a certain term. This means that you need to be sure that you will be able to cover those repayments not just in the short term but for the whole term of the loan. This could be a long time and so you need to think hard about it. Consider how secure your job is, what expenses you may have in the future and whether interest rates are likely to go up. All of these things could have a detrimental effect on your ability to make the repayments.
If you have calculated that you will only just make the repayments on the loan then it is worth thinking hard about whether it is the right thing for you. If Bank of England interest rates go up then it is highly likely that you will find that the interest rate on your loan will go up as well. This could mean that the repayments are then unmanageable and this could potentially be a disaster for you. Missing repayments means that you will have extra charges and will have to pay back even more money before the loan is paid off.
If you already have a lot of debt, then getting an additional loan is probably not a good idea. It is wise to think about how you can pay back what you owe before borrowing even more money. You may find that this extra loan is enough to mean that you can no longer manage the repayments and that you will really struggle as a result.
If you have enough savings to cover the cost of the item you are borrowing money to pay for then you should use these instead. Although it can be difficult to spend savings, as it is hard work to get them, if you do not do so, you will be worse off financially. Therefore anyone with savings should not be borrowing money or at least should use their savings up first.
It can be easy to think that if a lender considers you worthy of having a loan then it is right for you. However, we are all different in our attitudes and our lifestyle and so it is not just want the lender sees that could influence whether the loan is right for you or not. It is something which you should give a lot of thought to because it could have a huge influence on your life.