Pros and cons of taking a loan

February 7th, 2018

Loans are one of the most important tools for developing the economy in both macro and microeconomic terms. Being able to have fresh money, even more expensive at the end (because of interest) is important for our development. But when is it wise to borrow money and most importantly what? This is a very important question that everyone should ask themselves if one wishes to improve their financial situation.

The idea of ‚Äč‚Äčtaking new money with a loan is to bring more benefits and opportunities to work with. Unfortunately, this is not something most people would think of when deciding to take a loan. Many decide easily to borrow money to meet any needs that are not necessary nor will give benefits in the future.

Let’s look at some examples to see if a loan will give us more benefits or not.

For example, if we have an old car, maintenance and operating costs have increased in recent years, and we want to replace it with a new one, but we are missing money. Should we raise a loan or not? The calculation is simple – on the one hand we have the increased cost of the car and on the other we have interest on the loan, which has to be paid. If the two are equal or the price for the car is right then the loan to buy a new car looks like a good opportunity because in the long run it will save us money.

Here is the second example. We want to go on a luxury vacation, but we lack money? Should we raise a loan or not? What extra benefits would we have if we take it? In the end, we should feel better and become more productive, but would it directly reflect on our budget? No! So, we should not have any direct financial benefits if we take this loan. But we have to pay interest and we want a net loss to the budget.

It’s good practice every time we consider whether to take a loan or not to calculate the pros and cons. In this way, we can make a better assessment whether we should benefit or not to take loans. Anyway, whatever the loans you would take; payday loans, guaranteed loans, no guarantor loans, etc- you need to make sure everything is under control.

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