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Things Not to Use a Personal Loan For

Posted July 26th, 2010
by Staff

Personal loans are very versatile little financial vehicles, when it comes right down to it. If your credit is every moderately acceptable, you can get a loan to buy just about anything your little heart desires, and as long as you’re able to make the payments, everybody’s happy. But there are some things you just really shouldn’t borrow money for if you can help it. Here’s a short list of some really bad things to borrow money for:

  • Buying a pet. Look, if you really need that rare Tibetan cat that bad, save your money to get it. Animals that come with documentation generally end up costing you a lot more than the price you paid initially. They often need special grooming, special consideration at the vet’s office, and more. Let’s face it, if you can’t afford to pay cash for the animal, you probably can’t afford the upkeep. Go to a local shelter and get a stray instead. They make better pets most of the time anyway.
  • A car for your kid. Really, you’re better off making your kids go out and do the same things you did to get your first car. Even in a rough economy, there are plenty of odd jobs kids can do, and fast food places are still hiring all the time. Not only will you not end up paying three times what the clunker is worth, but you’ll teach your kid some responsibility. And if that isn’t a win-win, nothing is.
  • Vacation. You might think you can never afford a dream vacation without financing it, but let’s be realistic. If you can afford to finance it, you can afford to save for it. In the long run, it’ll cost you less. Either scale back your plans, or beef up your savings, but don’t take out personal loans to finance a trip that’s going to be over in a week or two. You’ll be paying for it for a YEAR or two. Not smart.
  • Paying off other loans. At first look, this may seem like a really good idea. Consolidating all of your bills into one payment sure would make life easier. The problem here is that the overwhelming majority of people who do this just end up taking all of that extra money in their budget and finding something else to buy on time with it. Eventually, you’re back in the same situation except you owe even more money now.

Don’t get the impression that we’re against personal loans. For big ticket items that you need or that will affect your day to day quality of life, they often make sense. Just don’t take them for frivolous things. If you don’t need it, save for it instead.

Photo via jinwesst



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