Borrowing options like instant loans, car loans and instant decision credit cards can be very handy in some circumstances, on the other hand getting into debt can become one big struggle it’s difficult to break free from. Here are some drawbacks to consider if you’re thinking about taking out a loan.
When you take out a loan, you need to remember it’s not just the loan amount you’ll be paying back. There will be a substantial increase on the initial amount you borrow due to the high interest rates applied to most loans, such as instant loans, car loans or payday loans. So whatever you’re taking out the loan to pay for, be it a holiday, a new car, new furniture or anything else, bear in mind the real cost of that purchase is likely to be far higher if you take out a loan instead of saving up over time.
New cars decrease in value
The most common reason for taking out a loan is to pay for a new car. But try not to be taken in by flashy advertisements for the latest model. Many people don’t realise how quickly new cars depreciate in value, meaning your initial investment is likely to be worth nowhere near as much the following year. It is usually far more economical to purchase a second-hand car, as these will tend to cost you a lot less and retain their value for longer. This may require a bit more research in terms of making sure the car is still in a good overall condition, but could save you many thousands of pounds for a vehicle of similar quality to that of a new car.