You probably receive promotional material from lenders trying to entice you to borrow money. The ads may even be personalized and worded to flatter. Now, there’s nothing inherently wrong with borrowing money – but only IF the timing is right. While you may know how to borrow money, you may not be exactly sure when to do so.
Want to know the worst time to borrow money? Keep reading.
Loans can come in handy at times. Perhaps you want to purchase a home or vehicle, fund an education, cover an emergency, or build your credit history. But if the money doesn’t serve a beneficial purpose, you could end up doing yourself more harm than good.
When are the Worst Times to Borrow Money?
When It’s Hard to Make Ends Meet: This may sound counter-intuitive, but one of the worst times to borrow money is when you need money. When you are struggling, a loan just adds one more thing to deal with and can complicate the situation.
Whether it’s a credit card offer or one of those high-interest payday loans, more debt won’t help you in the long run. You could get caught in a seemingly never-ending vicious cycle.
And never borrow money when there’s a chance you can’t repay the loan. A good way to ensure you are staying within your means is to first make a budget and include the loan payments.
When it is a Bad Deal: You should turn your heels on contracts with unwelcome terms, even if it’s your credit score that ultimately caused them. In any case, if the adjustable payments, high interest rates, or exorbitant penalties for missed payments aren’t tolerable, don’t accept them.
Having to hold your nose while signing off on a bad loan is never a good idea. If you do end up borrowing, make sure you read the fine print and fully understand the contract.
To Fund a Life Change: Life happens, and sometimes in a less-than-favorable way. Perhaps there is a medical issue, drop in income, or a divorce. Taking on a loan to maintain your former lifestyle during this time of transition isn’t the best move. Consider downsizing your residence or making a job or career change.
When Stressed Out: People joke about “retail therapy” being the cure for stress. But sliding out the plastic for a shopping expedition or month-long European trip is not an ideal way to cope with your emotions. It’s better to put off spending until you are in a better frame of mind.
To Treat Yourself or Others: Maybe you simply feel like you deserve a pick-me-up, or you want to buy a generous gift for a loved-one. While those reasons may be valid and come from a good place, spending on something you can’t afford can end up being a costly mistake. It’s rarely a good idea to borrow against future income.
Resist the temptation to act impulsively. Think long term. Otherwise, you are taking the risk of making a challenging situation worse. If you do find yourself in over your head in debt, you might want to consider a solution such as debt settlement. This strategy helps you avoid bankruptcy and can provide the fresh start you need.