If you had a fighting history with debt, you might have learnt about personal finance the hard way. It’s something that no textbook in the world could teach on its own. Unless your bank balance refills as fast as your laundry basket, you might have given a shot at personal loans at some point in your life. While personal loans can be a blessing during crises, they can also be one’s gateway to living hell.
Goes without saying, there are good and bad ways to make use of a personal loan. Depending upon how it’s spent, it could make or break one’s life. From lousy investments to plastic surgery, people have made a mess of their lives by practically using the personal loan for dumb reasons. Therefore, a personal loan should be spent with great deal of caution, or else it can lead to greater debt, damaged credit score, and bankruptcy as well. Here are some of the top reasons to avoid personal loan.
To pay for an upcoming vacation
Vacations are great fun. By all means you have a right to take few vacation days to enjoy your life. However, they should not be taken at the expense of a future debt. Choosing few days or weeks of joy for months or years of debt is not really a good bargain by any means. The world map won’t move an inch. The places that you want to visit will always exist. Therefore, it would make sense to save enough cash for the trip so that you do not get saddened with debt on your return. Postponing a trip may be a hard decision to make, but it’s nothing compared to the stress that unmanageable debt can cause. After all, who wants to come home and encounter additional stress in the form of significant debt?
To pay for an upcoming wedding
First up, you won’t have to put your engagement ring on display to obtain a wedding loan because there is no such thing as “wedding loan.” So, you will have to take a high interest personal loan to fund a wedding event. Remember, wedding is a one-day event. It should not accompany years and years of debt with it. Getting into debt to be the honorable host of a spectacular one-day event wouldn’t prove to be a great start for your marriage.
And not to scare anyone, a large part of living a happily married life revolves around one’s finances. Debt can only make matters worse. A workaround over here would be to save enough for the event or to have an inexpensive, simple event. Remember, wedding isn’t about meeting society’s expectations. It’s about declaring your love and affection towards your partner in front of your near and dear ones. And, you don’t need a million dollar budget for the same. A good life is more important than a good celebration. So, the idea and intent of a marriage loan should be tamed, whenever possible. After all, who would like to begin their married life in debt?
To pay to your friend
There are so many things that can go wrong when you lend money to your friends. You may not only lose your money but also your friendship. Moreover, money lent without a written contract will only boil down to the fact that you will have no legal rights to recovery. Therefore, it’s advisable to get into an agreement before loaning money to your friends. Although it’s an uncomfortable move, it can get far more uncomfortable if they were to default. Blame it on your wife, accountant or someone else who insists you to get things done in writing.
Also, some of your friends could be very casual with their finance which is not a good thing over here. So, before you decide to go miles to help your friend, think if it’s worth the turmoil or not, if things were to fall apart. There is no point in blaming the heavenly stars once you are on the losing end of the game. That being said, it’s sometimes ok to lose money to a good friend as long it does not impact your financial life. So, does helping your friend impact your own financial life?
The Golden Rule
Moneylenders are like sharks that should be avoided by all means, unless it’s an absolute necessity. As a general rule, one should limit their borrowings to investment decisions only and avoid them for lifestyle choices. For instance, one can consider a personal loan to obtain a house, business, education or any other financial asset. Things like vacations, gifts and entertainment can take a backseat because these are artificial desires that can pave the way for soul-crushing debts. These types of nonessential expenses should be subdued until one manages to save enough for them. Sometimes, it feels better when you don’t own it, rather than loan it.