Consumer loans can be an effective means now that unforeseen expenses or opportunities arise. It can also be cheaper and more manageable than sitting with a lot of small loans. However, you should think carefully before applying for a loan without collateral and you should certainly stay away if you are not confident in your own finances. Here are three situations where you should not apply for consumer loans:
1. Do not take out a consumer loan if you have payment problems
Do not take out a consumer loan without collateral if you have existing payment problems. If you have a loan that you are struggling to repay, it is best to contact your current financial institution to try to resolve the situation with them. Banks and finance companies, in particular, are often willing to provide repayment or an extension of maturity if necessary. You can also consider a loan with collateral if you have real estate, but this also does not come with warm recommendations as you risk losing the house if the payment problems persist.
2. Do you really need to take out a consumer loan?
If you find that wages fall short by the end of the month, you should preferably steer clear of consumer loans. It may be tempting to think that you can make budgetary changes, but if you have not had extraordinary expenses, it is too optimistic to think that you will be able to do so, especially with new expenses in the form of interest and repayments on top of it all. Don’t be too quick to assume you’re struggling with a temporary problem. The last thing you want to be is a debt slave.
3. Should you take out a consumer loan to get into the housing market?
It is not easy to enter the housing market and the requirement for deductibles has been 15% since 2012. If one does not have rich parents or other support, this is money that most young people do not have in their pocket, and then it can be tempting to Take out an unsecured loan to cover your deductible. But this should be carefully considered before throwing yourself out. If you are going to have an expensive consumer loan on top of the mortgage, you are extra vulnerable if something unforeseen occurs. There are many causes that can lead to payment problems: You may lose your job, get laid off, get sick or get divorced; and for many, much less dramatic changes are needed. In 2013, there were record numbers in Norway of forced sales of property, while consumer loans saw a sharp increase. In other words, unsecured consumer loans are a questionable idea for raising money for the deductible.
A general rule when it comes to unsecured consumer loans is that if you are struggling with a tight economy and have some outstanding debt, you should by all means steer clear. Then a new loan will usually create more flocks than it solves.