Should I Really Consider a Loan?
I hate student loans. They’re driving me crazy right now. Yes, yes, I know it’s partially my fault for working on my third degree, but that doesn’t mean they don’t drive me crazy. I had a private loan during my undergraduate career that I had to fill out five pieces of paperwork in order to get the stupid thing on forbearance while I’m taking classes.
Taking out a loan is a big choice to make, especially in this economy. If you’re like me and have to consider taking out a loan, here are some things that you need to ask yourself.
- What’s your credit look like? If your credit isn’t almost immaculate, forget it. Any late payments or excess debt will be scrutinized by your potential lenders. Now, make no mistake, I’m not saying that it needs to be perfect, but you need to take your credit score into consideration, especially when you look at the next question.
- What do interest rates look like? Interest rates in general are on the rise, even in the home market which has been struggling for over 2 years now. A bad credit score just makes it worse. In regards to the previous question, if your credit is lousy, your interest rates will be too. If the interest is lousy, you may want to reconsider taking out a loan at all.
- How much debt do you already have? If you’ve got a lot of debt, don’t be foolish and make more for yourself! I made that mistake this past year. I got another credit card instead of just holding onto what I had. I cancelled that credit card (which hurt my credit score) but the point remains. Why did I do that? I don’t even know, but I didn’t need more debt. Evaluate your debt verses your spending power and see if it’s really worth it to take out another loan.
- Do you really need what you’re taking the loan out for? Are you taking out a loan because you can, or are you taking it out in order to get something that will help you in the future? If you’re moving and getting a new mortgage, it’s one thing, but if you’re taking out a loan in order to buy something frivolous, then you may want to reconsider.
- What’s your job security look like? Are you sure you’re going to have a job long enough to pay off your loan? Is your company doing okay? Are you making enough to pay on the loan in the first place? All of these things are incredibly important to look at when considering taking out a loan. If your job isn’t feeling incredibly secure, maybe it will be best to wait it out and see what happens.
Think about all of these things before you consider taking out a loan. Always talk to a financial adviser and anyone else normally involved in your financial planning before you make any final decisions. Have a great weekend, and until next week, spend smart, save smart!