OK gals, here’s a little more Good Debt, Bad Debt fun. A guy at work is getting married. He doesn’t want to go further into credit card debt for his wedding (yes, so far so good), but he knows he won’t be able to afford it all (bugger). So, he wants to get a personal loan. This is a better option than getting a credit card bill for sure, and it isn’t like he can avoid this spending – he’s getting married and has already committed to the cost.
Now, here’s his major mistake: even though he thinks he’ll need about $8900 according to his budget, he thought he should borrow $10 000, just to kind of round it out, and just in case anything popped up spending wise. Um, no. Right now, interest rates for personal loans are much higher than for mortgages – they’re sitting at about 14 – 16%. Agreed, it is better than the ridiculous interest on credit cards, but not by that much. So there’s no need for him to borrow a cent more than he needs according to his budget – because he’ll be paying that off, with interest, and it isn’t absolutely essential.
If you really have to get a personal loan for whatever reason – not as crap as having credit card debt, but definitely close – don’t borrow any more than you absolutely have to, have a plan to pay it off on time, and find a loan that will let you pay it off early in case you get a pay rise or a decent tax return. Find out what extra fees you’re paying – these loans have establishment fees, and may penalise you for paying out the loan early too. And think pretty hard about a personal loan for pretty much anything. Buying furniture, electronics or anything that loses value quickly using borrowed money is particularly dumb. A better plan for the money you actually have is always way, way better.
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