Taking out a loan is a step that should be carefully considered. The term is several months or even years and may be a heavy burden on the borrower financially. During this time, the financial scope can change unexpectedly. An ongoing loan can then cause the debtor to come under considerable pressure. Nevertheless, it may be very useful or even necessary to take out a loan. That’s why potential borrowers should ask a question above all:
Is the credit of the investment or does it finance luxury?
1. Credit for investment
Such a loan is useful and helpful. For vehicles, real estate or even washing machines, borrowing is appropriate as long as the financial scope is not exceeded. The benefits here are usually so great that the interest costs pay off. Be it because rent is saved, the workplace is reachable or the monthly expenses are reduced.
An important step in deciding whether borrowing is worthwhile is to compare the possibilities and add up the costs. Washing in the laundrette, for example, takes more time and effort and is only possible for a fee. A washing machine, however, allows easy and time-independent cleaning of clothes and saves money. However, borrowers should not forget that every wash caused by electricity and water costs. These items must also be included in the calculation to find out when an investment will pay for itself. If this is the case over a reasonable period of time and the borrowing costs can be met easily, it makes sense to finance the investment through a loan. If the calculation reveals that one of the two characteristics is not correct, the search for alternatives can help. Especially used or less luxurious items can still lead to the goal.
2. Borrowing for luxury goods
Entertainment and entertainment expenses should only be paid for with the money already in place. Credit-financed entertainment media or travel are anything but useful from an economic point of view. They only serve the short-term satisfaction of needs, causing long-term and negative consequences. Moreover, such financing is not the best option. Even zero-percent financing has the catch that the cost of the goods offered far exceed the lowest price. In this way, customers pay unnoticed interest and the alleged cost savings is not present. Caution is advised when traveling. As a rule, the interest rates of the banks offering such financing are unusually high and can almost be called usury.
Who wants to finance luxury goods with a loan, so pays for what he already can not afford anyway, an unnecessarily high price. Before a loan for consumer goods is therefore not recommended. Saving is much more uncomfortable, but the much cheaper option. Anyone who begins to finance luxury with credit quickly finds himself in a spiral from which he can no longer get out.