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Will Getting A Second Loan Solve Your Problems or Create New Ones?

May 24, 2009 by DebtGeniusNo Comments Tweet this post

A lot of people who struggle financially believe that a loan will solve all their problems. This is a common misconception that could get you in more trouble than you’re already in if you’re not careful!

If you’ve already got loan payments you’re struggling to make, an additional loan, may be a very bad idea. A consolidation loan could be a good idea (depending on how you manage your money going forward) but a loan that you’re taking out to help you have more spending money or to make a big purchase you cannot truly afford is not a good choice to make.

Example:
People who take out a line of credit when they’re only making minimum payments on large credit card balances every month are not managing their finances wisely and are dangerously close to financial stress

There are a lot of considerations to weigh before you decide to take out a loan:

• What’s the interest rate like on the new loan?
• What are the payments going to be like?
• How fast will you pay it off?

Be very careful about borrowing money for something when you’re already in a cash strapped spot.

When a new loan could be a good idea

-A consolidation loan, if it’s the right loan, could be a good idea as long as you change your spending habits to get out of debt as quickly as possible.

-A student loan might be a good idea if it can help you better yourself so you can increase your earnings.

-A home improvement loan to fix up your house before you sell it when it’s a seller’s market might also a good idea.

What is definitely a good idea is to weigh your options and do everything you can to get out of debt as fast as possible. A mistake a lot of people make is to use a loan as a Band-Aid solution without carefully considering their budget and how that additional loan payment will impact their budget.

If you’re continuously battling the bills coming in without finding much relief, it might be time to have a financial planner help you create a workable budget and a plan to help you get out of debt.

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This entry was posted on Sunday, May 24th, 2009 at 6:19 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.