There are lots of sensible reasons for a personal loan, especially for younger and first-time borrowers. In general, younger or first time borrowers are in a tricky situation: on the one hand, they’re likely to have some major costs coming up.
This could include a first car, paying for education, furnishing a flat or even funding a wedding. On the other hand, younger borrowers haven’t had as much time to build up the savings needed to pay for these.
Working out whether a loan is a good or bad idea will depend mostly on your circumstances, but there are some general rules that can help:
- Firstly, remember that almost all forms of credit cost money – so it’s better to use savings, or delay the purchase until you have enough cash to pay for it, if that’s an option.
- Secondly, borrowing shouldn’t be used to fund a lifestyle or purchases that aren’t sustainable – it’s a bad idea to use credit to live beyond your means. Rather, it should be used only when necessary, to bring forward important purchases.
- Lastly, the golden rule: borrow only what you can comfortably afford to repay. Be realistic here, and consider what would happen if your circumstances change.
You can apply these rules to an example: buying a used car at a good price in order to be able to take a job in the next town makes a lot more sense than buying a flashy car on credit when you don’t have a job lined up.
If you would like to explore the possibility of getting a loan, please feel free to use our Free Finance Assessment tool