Loans have somewhat of a bad reputation, don’t they? There’s a common misconception that from the moment you sign on the dotted line for a credit card or a loan, the company you’re borrowing money from has you in their grasp. But the fact is that isn’t the case; loans aren’t necessarily a bad thing, it all depends on the type of loan that you get and what you’re taking it out for. It’s also crucial to use the money that you have borrowed wisely, and only to ever take out a loan when necessary. To give you a better insight into loans, below we’ve shared the good, the bad, and the ugly of borrowing money. For everything that you need to know, read on.
The Good
One of the most amazing things about borrowing money is the fact that taking out a loan, whether it’s a credit card or a bank loan, can get you out of a tight spot. It can allow you to pay the bills that have begun to pile up. It can allow you to clear any debts that you have. A popular type of loan for homeowners is a refinance mortgage, which allows a certain amount of money to be released from the property. If you’re keen on this type of loan, you can look at today’s best refinance mortgage rates online to get an idea of how much money a refinance loan could give you. This type of loan can be ideal for helping you to get things back on track when your finances are in a mess.
Sure, the money for a loan has to be paid back, but a loan can help you to get your finances back on track. Sometimes, when money is tight, it can feel as if you are trapped in a situation that there’s no solution to, but a loan can change that. It can help you to get your finances back on track and can make life easier for you – a loan can be lifesaving.
The Bad
One of the downsides of taking out a loan is the fact that sometimes loans can be difficult to pay back. This is because often the repayments can be high as there is interest added to the loan. The lower your credit score and income, the higher the rate of interest you will be charged, which can make keeping up with the repayments a little difficult.
The fact that interest rates can be high is a bad thing as it can mean that the repayment amount can be much higher than the amount originally borrowed. The APR rate that a loan has determines how high the interest will be. An APR rate of 10% means that on top of paying back the loan, you will also pay an extra 10%, so if you borrowed $1000, you would pay back $1100.
The Ugly
Then there’s the fact that there are some dodgy loan providers out there that offer loans with incredibly high interest rates. They get away with doing this because the people that they offer them to have credit scores that are too low to allow them to get loans approved, and so their only option is to use a loan shark. A word to the wise, don’t take out a loan shark loan ever, as it’s a recipe for total financial disaster.
There you have it, a guide to the good, the bad, and the ugly of borrowing money.
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