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Borrowing Money for the New Year | The Ups, Downs & Everything Else

By: Donna Chaffins | Date: December 27, 2012 | Categories: Financial, Guest Posts, Money Talk

Guest Post

The idea of taking out a loan automatically seems to have negative connotations attached to it, however if you’re struggling with your finances after this Christmas, it might seem like a tempting option.

Loans do come in many different forms however and the important part is that whatever finance options you take, the important part is that you go into it informed; what are the pluses and negatives? What’s great and what’s really not? Read on to find out.

Money

Image courtesy of 401(K) 2012 from Flicker

Mortgages

The good: This part is simple; you get a roof over your head. Like nothing else you’ll ever have, owning a house is one of the most significant financial decisions of your life and without a mortgage this would often not be possible.

The bad: This loan will often be tied in to your home. If you slip up on the repayments, you could find your house and potentially your family in jeopardy. Mortgages will also frequently require a large down payment. However, short of a massive windfall it’s unlikely you’ll be able to afford a house any other way.

Short Term Loans

The good: Often vilified, a short term or “payday” loan can often help weather the storm in a financial emergency, your money is available fast so you can use it where it’s needed. The immediacy offered and flexible repayment dates can make this a great option for short term financial worries.

The Bad: If you miss your repayment, this short term solution can turn into a long term problem. High interest rates and inflexible repayment periods mean it’s essential to make your repayments on time.

Credit Cards

The good: Unlike the two “installment” loans above, a credit card is a “revolving” loan. This means that you set a limit with your bank, and then you’re free to spend up to that amount; you can borrow up to your limit, pay it off and then borrow it again. This sort of flexibility can be a useful resource for a busy lifestyle.

The bad: Unfortunately, while credit cards often offer 0% interest as an introductory offer, their interest rates are often very high; missing your payments could see you hit by high interest and late payment charges.

Student Loans

The good: It’ll never get better than this. In the UK, your student loan is given to you for the purpose of paying your tuition fees with a smaller secondary loan awarded for living expenses if needed. Your student loan has the best interest rate you’ll ever get and doesn’t need to be repaid until you start earning over the threshold.

The bad: There’s a lot of it. The BBC suggests that the average students debt could reach £53,000. This is a scary amount of debt for student just entering the working world for the first time. This loan is only available to students, and may not be applicable in your country.

What Now?

If you find you need a loan, weigh up what’s best for you. There are pros and cons about each type of loan on this list and the key to successfully borrowing is to make sure your finance solution is the right one for your needs.

Geoffery is a finance writer who is specialized in the personal finance industry.  When he is not blogging about personal finance he writes about short term loans for sites similar to www.wonga.com – a digital finance company based in London, UK.  

19 Responses to Borrowing Money for the New Year | The Ups, Downs & Everything Else

  1. Great tips! Thanks for sharing! 🙂

  2. So many different types of loans. I had no idea.

  3. I really hate borrowing money. I was able to pay off 4 credit cards in 2012, as well as my car. I hope to pay off something else in 2013!

  4. Maryann says:

    I am so glad we don’t need any new loans right now. We did refinance recently so that was a BIG deal.

  5. We paid off a huge debt last year, hopefully after we pay off our home renovations we are never in debt like that again!

  6. Jenn says:

    I hope we never have to borrow money again!

  7. Mellisa says:

    Great tips especially for those who are in need of borrowing money.

  8. For once I don’t need a loan. It’s a relief.

  9. Kathleen says:

    Great post. I definitely think some people don’t think of the consequences that some of these borrowing actions could have.

  10. Great tips! Thanks for sharing!

  11. we just refinanced our mortgage but if it were up to me we’d never ever borrow money. I hate it

  12. Lolo says:

    We are looking into a car loan right now.

  13. I never borrow money.. with the exception of credit cards, but I don’t consider that borrowing because my cards are always paid off at the end of the month.

  14. We’re about to sell our house and take on a larger mortgage so I know about loans.

  15. Great tips. If it’s the same author, I think I’m reading his book now.

  16. Colleen says:

    I would just love to win the lottery and need NO loans LOL! One day I hope to have a mortgage, which means I will own my own home.

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