Nearly half of all people do not even have $400 stashed away in a saving’s account for important life events and emergencies. When opportunities for travel, marriage proposals or other life events arise, the lack of funds may leave consumers searching for loans instead. Emergency situations can put the loan search into overdrive as well. Unfortunately, travel loans, wedding loans and rent loans are all potential types of bad debt that can leave consumers with high interest rates and exorbitant fees. There are ways that you can avoid these types of bad debt and still fund your most important life events – and any emergencies that may arise along the way. Here’s what you need to know about these types of bad debt.
Types of Bad Debt to Be Aware Of
We’re going to discuss three types of debt which are not necessarily bad, but they can be, if you’re not well informed. So here’s everything you need to know.
Reasons Taking a Loan for Your Wedding is a Bad Idea
Without clear spending limits based on actual funds available, not loan money, weddings can quickly grow out of control and cause financial problems that last for years after a couple ties the knot. Taking out a loan for a wedding can make it tempting to increase the budget without thinking about financial repercussions. Loans for wedding expenses can quickly spiral out of control to cover the costs of the food, clothing, decoration and other elements of the perfect wedding.
By paying for the wedding by taking out a loan, it ties up the credit lines and incoming funds of the couple. With this choice, both parties lose opportunities to allocate those funds differently and even in potentially profitable ways. Furthermore, the cost of the wedding goes up to account for the fees and interest paid throughout the life of the loan. These extra costs can increase the total balance of the loan by 30 percent or more, depending on the terms of the loan.
Couples can benefit from pulling in the reins on spending at the start of the marriage, rather than splurging on a dream wedding. If available, the funds or credit lines could be used to open a business, purchase a home or pursue another avenue that provides lasting benefit to the couple.
Personal Loan for Travel May Stop You in Your Tracks
Like most people, you may need a little boost in the financial department to achieve all your travel goals. Reaching for different types of travel loans can prove detrimental to your finances for the long term, however. Travel loans tend to carry high-interest rates and fees that can leave you struggling to abide by the repayment terms. Although people with good credit can find travel loans in the 10 percent range, the interest rates can reach much higher for those with less than stellar scores.
Many of the travel loans add enticements if the loan is paid within the given time frame. Unfortunately, if the loan is not paid off in time, all the deferred interest is added to the loan balance. You can avoid these loans by creating a travel funds account and putting money in there every month to save for your travels. With time, you can accumulate enough money to pay for your transportation, lodging, food and other expenses without taking out any types of bad debt.
If you cannot wait and need to travel now, take the time to find a quality lender who can offer travel loan terms you can handle. Before agreeing to the personal loan terms, you will need to ensure that you can pay off the loan without impacting your monthly finances in a negative way.
Loans When You Need Help Paying Rent
As a solution to a temporary lapse in funds, personal loans can work when you need help paying rent. When you have emergencies, it can make sense to take out a personal loan to cover your rent, so you can stay current on your housing until the situation resolves. Problems can occur, however, if you do not have the incoming funds available to fulfill the repayment terms and cover your living expenses.
Rent loans turn into a form of bad debt when the repayment terms are not fulfilled. The loans then go into default and can decrease the credit score of the borrower. When acquiring loans for when you need help paying rent, you must take the time to find the right lender and loan terms to avoid the types of bad debt that can decimate your financial health. When you put time into this process, you can ensure that your financial health will remain in good standing as you work on paying off the loan balance.
What is a Good Reason to Get a Personal Loan
Although you should aim to avoid different types of bad debt, not all personal loans, and situations, are the same. Unless you can maintain a hefty emergency fund, or stay ahead of all expenses, you may encounter times that necessitate your pursuit of funds from a lender. A sudden move, health treatments and vehicle repairs all present as valid reasons to get a personal loan if you do not have any other funds available. You can also use a personal loan to consolidate your debt and pay it all off in a short period of time. To ensure all goes to plan, you must follow the best practices in acquiring a personal loan to avoid problems commonly found with types of bad debt.
— TheSavvyWomanCFE (@SAVVYWOMANCFE) February 27, 2019
Best Practices in Acquiring a Loan for Travel, Wedding or Rent Payments
When you want to acquire a loan for travel, wedding or rent payments, or any other personal expense, you can breeze through the process by utilizing a few key best practices. No matter the amount you seek, your personal loan should come from a trusted lender especially if it’s a payday loan company. Furthermore, the lender should offer the support you need to find the loan products that will serve your needs best.
You should shop around as much as possible to explore all the different loan terms and interest rates available to you. These terms may change as a reflection of your personal credit score, income and other important factors. Explore your personal loan options with help from your bank, credit union and online lenders until you find the terms that work best for your financial situation. Loanry can help you connect with the best online lender for your situation. Together with Fiona, we created this form below.
Avoiding Types of Bad Debt While Covering Your Expenses
When you need help paying rent, it is important take the time to avoid types of bad debt by utilizing the best practices in acquiring a personal loan. Your efforts will help you find personal loans with the repayment terms you can handle to satisfy the debt without problem. Otherwise, you could end up trapped by one or many different types of bad debt, resulting in serious damage to your financial health.
There are loan products available for nearly every situation, however, so it is beneficial to do your research in finding the right level of financial assistance for your needs.
Marie regularly produces engaging web content and informative SEO articles for small and large enterprises worldwide. She is frequently published on Loanr.com.
She believes managing money wisely is one of the key pillars of life is for everyone and focuses on being educations, well-researched and even entertaining at times through out her work.