Many consumers face this question. Even if the answer to this cannot be given universally and it always depends on the personal financial situation of the borrower, there are some basic things to consider when borrowing.
The most important basic rule when borrowing is surely not to overwhelm yourself financially.
Credit: what needs to be considered?
Consumers should therefore honestly assess whether they can continue to pay the monthly installments for a loan in the long term. It may also be possible to postpone individual consumer requests in the future: this saves hard cash.
With larger purchases, such as the purchase of a car, it will hardly get around a loan. Here, too, you should ask yourself whether the purchase at the planned time is really sensible and necessary.
Consumers should also compare the cost of borrowing: Even small differences in the annual percentage rate can make price differences of a few hundred to a thousand USD.
Why choose a loan?
- If the credit card is overdrawn on a regular basis, it can make sense to balance the credit card with an installment loan. Installment loans are usually much cheaper than repaying a card.
- Investments where you can make a big profit.
- You can pay for your car with a loan and get cash purchase discounts.
- Real estate abroad: Of course, a bank loan makes sense for retirement or as a later investment
- If you are already taking out a loan, you should spend the money on the everyday things that are really necessary. Beware of consumer goods and vacation trips: Here it is often more sensible to save the necessary amount of money instead of financing it.
What are the arguments against borrowing?
- Calculate whether your income is sufficient to sustain the loan installments in the long term. Also, take into account possible losses in your income as well as cost increases for everyday things.
- If the bank refuses a loan, it may be a sign that they are overly optimistic about their own financial situation. Be careful in this situation. Offers from credit intermediaries or those that promise loans without a ZEK should be viewed particularly critically.
What needs to be considered when taking out a loan?
Compare the prices and also take online credit into account when choosing a bank. The decisive factor for the cost of a loan is not only the interest but also all costs incurred. The criterion for credit comparison is the annual percentage rate.
If you want to speculate yourself with the money raised. In other words, you should never take out a loan for a share purchase with a supposedly surefire return. The only sure thing is that you have to pay the money back with compound interest – even if the actual amount has long since vanished into thin air.
So always check carefully that there is no other way before taking out a loan. Never take out a loan for an item or an action whose value expires. A vacation trip is a classic example of this: three weeks of relaxation, three years of paying off!