June 12, 2009

Deciding if a Loan Is Not a Good Idea

by Sara Ferguson

Personal loans arent always the best way to borrow money. You might want to think about it if:

You need to borrow only a few hundred dollars: The smaller the sum you borrow, the higher the rate of interest you pay. Borrowing an amount under $2,000 is extremely expensive in terms of interest charges. Most lenders also have a minimum that you can borrow: If you need less, you may find yourself taking out a bigger loan simply in order to get the money in the first place. This isnt a wise move. You may be better off borrowing smaller sums on a credit card or extending your overdraft instead of opting for a loan.

You can repay the money in a couple of months: The shorter the loans term, the bigger your monthly repayments, so work out whether you could afford them if you take a loan out for just a year or so. If theres a chance that youll be able to clear the loan even sooner, you may be charged a redemption penalty for doing so. If this is the case, you may be better off borrowing on a credit card with a 0 per cent introductory period for several months instead. This may be enough time to repay your borrowings " without having to pay any interest at all.

You're borrowing $40,000 or so to improve your property: If you already have a mortgage, it might be better to ask your mortgage lender to extend your home loan rather than take out a personal loan particularly if you need money to build an extension or otherwise fix up your home. Although interest rates on personal loans have fallen, they still tend to be higher than mortgage rates (the cheapest loan is around 7 per cent compared with mortgage rates of less than 6 per cent). So you pay less interest if you increase your mortgage instead. This is easier to arrange than a personal loan because you already have a relationship with the lender.

Think carefully before extending your mortgage and overburdening yourself. Your home is at risk if you cant keep up the repayments on it, whereas if you take out an unsecured loan to pay for your extension, your home is safe. Dont gamble with your home. Before you decide to take a loan, make sure you really need it, the worst thing to do is to borrow when you have other options.

About the Author:

Learning how to invest is a long and complicated process. How to Invest Today is an educational blog dedicated to teaching how to invest.

Tags: bigger loan, mortgage rates, wise move, good idea

Filed under Personal Loans by Sara Ferguson

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Comments on Deciding if a Loan Is Not a Good Idea

November 4, 2010

JohnM @ 11:44 pm

One thing going for grgr is that it does not require borrowing money to stay in business. Every news release I has that as part of the mantra. Thats a good position to be in now. Plenty of companies, especially small ones, will go under just because they can't rollover loans, even though they may be cash flow positive.

That's what is happening to homeowners with adjustable loans. They went in with the expectation that they could refinance before the rate went up. They lost the musical chair game.

November 5, 2010

graybutcolorful @ 12:48 pm

I? am currently taking an interesting class about the high middle ages and have taken classes about the early middle ages and the late middle but I am still trying to wrap my head around the fall of the Roman Empire. I don't get it, if the Roman Empire was part Byzantium and the Byzantine empire was around far later then the so called date of the fall of the Roman empire then how is that possible! I'm not even that interested in Rome, I just need the context for studying the crusades. HELP!

centennial gold @ 3:23 pm

It is absolutely obvious that young people have very little knowledge of personal finance. Even some of the college students think that the money from credit cards is free. And not only young people are ignorant about credit cards. The best way for them to choose the right credit card is read the details. There is a great site to compare credit card offers

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December 25, 2010

SilverRedIndigo @ 9:30 pm

January 13, 2011

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January 15, 2011

Twitter @ 9:40 pm

http://www.viaguru.com/ > ViaGuru Finance Personal Loans-Auto Loan After Bankruptcy Restoring…

February 3, 2011

ChristinaVahlsing @ 11:36 pm

February 17, 2011

Christopher @ 5:28 pm

At one time thrift was a virtue. You and I think it still is. We are not alone. But our economy runs on debt. We are encouraged to borrow and buy.

Economists tell us that a certain amount of debt is a good thing. After all, borrowing money to buy tools makes sense. Borrowing money to go on holiday is more suspect.

I was reading through Take Back Your Time: Fighting Overwork and Time Poverty in America edited by John de Graaf. I like the chart in the essay, The Time Cost of Stuff. It reads:
1. Acquire it
2.Lean it
3.Operate it
4.Store it
5.Maintain it
6.Fix it
7.Make payments on it
8.Protect it
9 Feel guilty about it
10. Upgrade it
11. Sell it.

I have discovered that I can get a second steeping out of a pot of Brooke Bond Red Label. Now there's real savings for a life-long tea addict. And I say tea addict like it's a good thing.

March 22, 2011

sexydarin1 @ 1:20 am

We don't need a gold standard,? we need politicians with enough balls to pass laws to cut spending then limit spending, so politicians who overspend are thrown in jail with the likes of Berney Madoff. Throw the thieves in jail!

April 1, 2011

Tudor @ 9:35 am

No interest was paid. But that needs changing, some of this civil (?) servants sit on issues and if they feel that you are asking too many questions the you file goes to the bottom of the packand the procedure starts all over again.

I believe that the same way that we have to pay late payment & interest charges to Govt, then Govt should pay us as well. In fact Govt could use it as a management tool in the various depts to increase productivity,

June 6, 2011

Troy Camplin @ 12:45 pm

Greenspan kept interest rates artificially low. Low risk creates low interest rates. Thus, low interest rates send out a signal that there is not enough risk being taken in the economy. Thus, riskier loans are made. This should result in a feedback to raise interest rates, but Greenspan kept on the downward pressure. As a result, risky mortgage (and other) loans continued to be made. Until people couldn't pay their bills. Bernenke should be letting interest rates go up, but he's keeping them artificially low, only exacerbating the problem by using more of the same thing that caused it in the first place. ONly low, the banks aren't giving loans at all, because the interest rates are too low to make it worth the risk to make the loans.

July 5, 2011

starke @ 5:01 am

Did I send this to you before? This is from Ham Wilson …………

Per your request, we have reviewed Act 2009-627 which is commonly referred to as the Alabama Secure and Fair Enforcement of Mortgage Licensing Act of 2009 and Act 2009-624 relating to amendments to certain sections of the Mortgage Brokers Licensing Act. Both Acts specifically exclude licensed real estate salespersons or brokers from the licensing requirement. Act 624 in 5-25-3(6) specifically excludes “any licensed real estate salesperson or broker who provides mortgage loan assistance in the course of doing business unless the real estate salesperson or broker is compensated for providing mortgage loan assistance.” In Act 627, in Section 3, Definitions, a mortgage loan originator specifically states that it “does not include a person or entity that only performs real estate brokerage activities and is licensed or registered in accordance with Alabama law, unless the person or entity is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of such lender, mortgage broker, or other mortgage loan originator.”

It is my understanding that there is some concern that the Alabama Secure and Fair Enforcement of Mortgage Licensing Act of 2009 (Act 2009-627) makes it a requirement for a person providing owner/seller financing to have a mortgage broker’s license. We do not believe that this Act makes it a requirement that a mortgage broker’s license be obtained by a person who is providing owner/seller financing for his own property. Specifically, a mortgage loan originator is defined as “an individual who for compensation or gain or in the expectation of compensation or gain – (a) takes a residential mortgage loan application; or (b) offers or negotiates terms of a residential mortgage loan.” The seller in owner financing situation will not be taking an application, nor would they be taking a fee for originating the loan. While it could be argued that a person who is selling a property will have a capital gain, I do not believe that gain was contemplated by the Legislature. Furthermore, the exemptions from this Act as set forth in Section 4 specifically states in Section B that “Any individual who offers or negotiates terms of a residential mortgage loan with or on behalf of an immediate family member of the individual”, and Section C, “Any individual who offers or negotiates terms of the residential mortgage loan secured by a dwelling that served as the individual’s residence” are exempted from the Act. Clearly, if a person is exempt from the licensing requirement when owner financing his own residence and when working on behalf of an immediately family member, certainly that individual would not be bound by the licensing requirements of the Act for negotiating the terms for seller financing for a second home or property owned by that individual. Especially when he or she is not taking compensation.

July 7, 2011

Twitter @ 9:17 am

“I have never seen an industry like ours that celebrates borrowing money,” rel="nofollow"

August 9, 2011

Le Vintage @ 8:26 pm

Don't Gamble With Your Retirement: 5 Tips For Success

September 11, 2011

@ 1:06 pm

>not parse..>>>jus wondering…if the rate of interest the bank sets aside on ur installment be same/different from at wat it is lendin u…>>> for banks borrowin/lendin rates are different(dats the whole idea behind a bank)..not sure though abt monthly installment stuff..>>

ps:nice post..nobody was anyways using ur formulas…]]>

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October 21, 2011

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November 11, 2011

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November 13, 2011

ABC News: Top Stories @ 5:26 pm

Take This Bank and Shove it: Alternatives to the Giants –

November 16, 2011

@ 12:43 am

>> had a friend at the time who worked for a company that legally removed unsecured debt (credit card debt) from a person’s credit. Not consolidate or reduce, but completely wipe away all unsecured debt. The cost of this program — you guessed it, $695. It turns out there are many companies that specialize in debt removal.

November 24, 2011

EduTecRio @ 10:42 am

Rhizomatic Learning – Responses for day 1. » Dave's Educational Blog

December 27, 2011

@ 3:17 pm

Fabius Maximus replies: That's only because …

(1) no angels come down from heaven to run for public office, And
(2) we pay public officials a fraction of what senior executives earn who handle equal or smaller sums.

People who allocate the spending of billions (local or State level) or hundreds of billions (Federal) will have some of that money stick to them. You can label it however you like.

Extending the concept … Given the adverse effect of gravity on our bodies and its role increasing transporation costs, perhaps we should give it a pejorative name. Like "evilgravity".]]>

December 30, 2011

joshjewa18 @ 3:49 am

yup jus lemme take out a bigger loan 4 a better refund check lol j/k

January 20, 2012

paydayloans @ 2:29 pm

- Houradvance: Personal Loans No Fax | Instant Cash Advance | Short Term Personal Loan … T…

March 8, 2012

l vent @ 5:13 pm

No one should be able to steal the roof from over your head because they say you owe them an Unsecured Debt. The Government is allowing this, so they are complicate. That is clearcut fascism being carried out by an elite group of financial terrorists being aided and abetted by our own Government because these Nazi's have bought and therefore have corrupted our entire country.. The result of the corruption is a crumbling America that will soon be bankrupt. and ripe for a takeover by this rogue regime.

eboneeb900 @ 8:10 pm

i no what your going through i lost someone close to me recently and it's the worst thing ever:( xxxx

April 9, 2012

Twitter @ 9:35 am

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In the highlands of Scotland in the 1700s, Rob Roy tries to lead his small town to a better future, by borrowing money from the local nobility to buy cattle to herd to market. When the money is stolen, Rob is forced into a Robin Hood lifestyle to defend his family and honour.

April 18, 2012

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