We all think that unsecured debt is not dangerous, and we have almost nothing to lose. However, even though you will not risk your house or your car, you will need to make sure that you are making the repayments on time so you can build your financial future and avoid future troubles. In case you are thinking about getting a personal loan for a holiday, here are some considerations before you make a final decision.
Are You Comfortable with the Repayments?
When you plan your vacation of a lifetime, you will have to consider the long term commitment of taking on an unsecured loan. You will need to budget for the extra monthly expense, and make sure that you make the payments, or you are going to end up in trouble. Just like mortgages, not making the payments on Unsecured debt can cause serious money problems that will have a negative impact on your life for years to come.
Have You Got a Secure Income?
Before you apply for a loan for luxury items, such as a vacation or a sports car, you need to check how secure your income is. What would happen if you lost your job in a few weeks’ time? Would you still be able to make the repayments, or have to cut back on your spending or struggle to get another job? If there is the slightest risk of losing your income, you should think twice before getting a loan.
How Much Interest You Get Charged?
Many people are not comfortable with calculating how much interest they have to pay over time on a personal loan. There are great online loan calculators that will tell you exactly how much your vacation will cost you. Once you have worked out the total cost, that deal might not look that good after all. Is it worth to get into debt over your travel plans, or could you wait and save up instead? You should also take into consideration the cost of the agreement, administration charges, and other related expenses.
Are You Risking Your Credit Score?
Just like mortgages and car finance agreements, unsecured loans can damage your credit score, too. Applying for too many finance agreements over time will only reduce your score and your ability to secure future finance, such as a mortgage or a car finance. Ask yourself whether the vacation is worth it, or can you save money instead and pay for your travels out of your pocket? You might only need to wait until your next bonus or annual contract payout to be able to pay for your vacation.
Taking out a personal loan to cover your travel costs can be dangerous for your financial future and your credit score. Always check out the terms and conditions, work out how much you have to pay back in total, and make sure that you can afford the payments, even if you happen to lose your job or get sick.