Top 10 Worst Reasons to Take a Personal Loan
Posted February 26th, 2010
by PersonalLoans.org Staff
A personal loan from your local bank or credit union can be a good thing. It can help you make improvements to your home, or it can help you pay for college. You might take out a personal loan in order to consolidate some higher-interest credit card bills or other forms of credit.
However, there are also some bad reasons to take out a personal loan. Here are the top 10:
- Buying a pony. Because, hey – who doesn’t want a pony? Still, a pony takes a lot more money than just buying it. Unless you can buy oats on a regular basis, this is a bad reason to take a personal loan.
- Buying a car. Unless you’re talking about a 10 year-old clunker, you should try to get a traditional car loan first. Your interest rate will be lower. I promise.
- Going on a fishing trip. Most fishing trips shouldn’t cost thousands of dollars. If yours will, chances are you’re doin’ it wrong.
- Paying bills. If you need to take out a personal loan to pay bills, you’ve got bigger problems. It’s a sign your budget may not be as well thought out as you might like. Try to find other ways to pay your bills, rather than with a personal loan.
- Building a moat. If you must have a moat, get a home equity loan rather than a personal loan.
- Paying a student loan. Personal loans are great to pay for college expenses, but not after the fact. Your student loan rates are going to be much lower than any personal loan.
- Pocket money. Here again, if your budget can’t support your video game habit, you need to buck up and deal. That, or find a better job.
- Starting a business. There are tons of better sources for startup money than a personal loan. I’m not saying you should never do this one, just that it should be a measure of last resort.
- Buying an engagement ring. That’s just the first step in the “three rings of marriage.” The engagement ring, the wedding ring, and the suffer-ring.
10. To pay off a personal loan. That’s like robbing Peter to pay… well, to pay Peter, I suppose. After you pay the loan fees, even if you get a better rate, chances are it’s going to be a wash at best.
Photo via dreamcicle19772006