Loans can come in handy for all kinds of expenses, which is why it’s important to keep a healthy credit score and understand what kind of loans are out there in case you ever need them. While getting into debt shouldn’t be your first choice, loans can help you to afford bigger items sooner, as long as you’re sure you can make the repayments on time every month.
One of the most common reasons for taking out a loan is to finance a new car, and this one’s totally understandable. Most people use their car to get to work, so taking out a loan to allow you to continue bringing home the bacon seems like a reasonable trade-off to make. If you do take out a loan to finance a new car, be careful not to overspend – just buy what you need – because otherwise you may be paying the car off for many years.
Home improvements are another top reason to take out a loan. Like a car, home improvements are often considered an investment because they can increase the value of your home in the long term. Of course, they also make your home more pleasant to live in and sometimes they can feel necessary, particularly if your kitchen is dated and appliances are no longer working the way they should. Loans for home improvements can be a good investment provided you’re careful to only borrow what you can pay back.
Many people take out loans to pay for holidays. While this can be a good idea for those people with reliable incomes who know they can pay the loan back, it’s important to only take out a loan to pay for a holiday if you’re very confident of paying back the loan. If you’d rather avoid taking out a loan but still want to take the family on holiday, you could consider budget options like staycations, camping trips, and UK holidays instead.
The cost of the average UK wedding today is an eye-watering £16,000, so it’s no surprise that many people resort to taking out loans to pay for them. A wedding is, hopefully, something you only do once, so it’s understandable if you want to splash out. However, if you’re taking out a loan to pay for a wedding, you could consider cost-cutting measures to take such as enlisting friends and family to help with wedding photography or making the cake, and still pull off the perfect day with less debt to pay after it.
Pay off existing debt
Sometimes it does make sense to take out further loans to pay off existing debt. If you can find a loan with better repayment terms and a lower interest rate, it makes sense to pay off high interest loans (such as payday loans and short term loans) quickly, so that you can reduce the amount of interest you will pay overall.
Finally, you may need a loan to pay off unexpected bills. This can be anything from the boiler breaking to vets bills, and sometimes even those of us with savings can’t afford to cover these unexpected costs without taking out a loan. Obviously, it’s more preferable to take out a loan and replace your boiler than it is to try and survive the winter without heat, so loans are highly recommended in this instance. Just be sure to shop around first and try to get the best terms, and don’t be tempted to take out more than you need to.