You must have asked yourself this question, “can you take out a loan for living expenses?” If you expect a yes or no answer, then the answer is yes. Although it all depends on the lender. A perfect example of a loan lender that will allow you to take out a loan for living expenses is an issue of student loans.
How wise is it to take a loan for personal expenses? Let’s find out.
Spending is a personal decision. When it comes to money, it is not a good idea to borrow for personal expenses. Experts advise you only seek a loan to spend on an income-generating activity. Doing so will allow you to pay back the money comfortably.
Spending money on unnecessary things is a dangerous undertaking. This is a wastage of money. It is costly, and the consequences are dire. You cannot afford to be a spendthrift with borrowed money.
It is crucial to have your priorities right in place. For instance, imagine a student spending student loans on drinks and vacations. It is clear what awaits him/her. The results will be the money will deplete within no time, and depression will set in.
Think about another instance where someone takes a loan to pay another debt or buy a car. Is it a good decision? Your guess is as good as mine. Taking out a loan for living expenses that are not necessary is digging your own grave.
Why so? Loans come with interest rates. This means as time goes by, the amount repayable increases. If you were wise and invested the money or spent on income-generating ventures, you will have an easy time settling the debt. If you chose to be extravagant and spent on entertainment, then be ready to welcome auctioneers.
In many cases, students are notorious for taking out loans for personal expenses. Some don’t consider whether it is a low-interest loan rate they are dealing with. The purpose of student loans is to cater for fees and pay for basic personal needs.
Lenders of student loans do not have a problem if a student spends some of the money on paying rent or purchasing study material, among other essential expenses. After all, you need to survive. Besides, these are supporting expenses for you to focus on your studies entirely.
Without them, it would be hard to concentrate. Lack of concentration means you will score poor grades. With a poor grade, you lower chances of getting a better job.
That is why lenders don’t mind you spending your loan on personal expenses. Now, this is where the problem is. Some students choose to live lavish and spend extra. They go for vacations and waste money on sumptuous lifestyles. Within no time, the money lent to them is over. Experts advise students should not use borrowed money to pay for living expenses. Instead, they should channel the funds to only necessary expenses.
What can you Use a Personal Loan For?
Yes, you can take out a loan for living expenses, but that is not a good idea. If so, then, what should you spend your loan on?
A personal loan can be used to pay medical bills. If asking for a loan, for this reason, a lender issuing student loans might consider it. Medical expenses are reasonable and excusable. You need to be in good condition health-wise to perform well in class. Therefore, we can conclude this is a supportive expense.
Small Business Investment
Money should grow. It should multiply and bring in more money. The only way that will happen is if you make the right money moves.
Finding a viable business and investing in it to make more money is wise. A lender will be more than happy to give you money, knowing you are putting the money in business. This is because the lender is sure their money is going to come back.
A borrower who uses lent money to invest in making money is usually treasured by lenders. In fact, they increase their chances of getting a higher loan limit at a reduced interest rate.
Every business is a risk. So, ensure your risk on the right venture. If you do not do your homework well, be sure to lose your money. An event your lender will not want to care about when it’s time to repay the loan.
Having one lender to deal with is less stressful compared to repaying loans back to different lenders. That is why debt consolidation using borrowed money is better than spending on living expenses. Although not the best idea, it can still work to lay off pressure from you.
Some expenses are inevitable. As long as it is required, there is no problem in using a loan to pay for living expenses or even a payday loan is not a bad idea after all. This requires discipline, Make sure to draw a clear line on what costs and bills are a must and what you can survive without. You should not cross the line at any time, especially with loan money.
Spending on the unnecessary will land you in debts, and this will throw you into a financial rut. Maintain discipline and always remind yourself that loan money is not your money. With that in mind, you will behave and only spend on what adds value. Never forget loans attract interest rates and penalties. Together with the power of compound interest, that is enough to finish you off financially.
The Bottom Line
Loan money should be treated with the respect and caution it deserves. Taking out a loan for living expenses is not the best idea. Although, sometimes it is the only option left. Just ensure you exercise discipline and care not to land into trouble with auctioneers for default payments. In conclusion, make sure you critically compare loan rates and settle for low-interest loan rates.