Why Mom Was Right About Loans

I remember mom's words as if they were yesterday, “Loans are double-edged swords. If you're going to play with them, you better well know how to use them. Otherwise, you'll end up injuring yourself.”

When I was a child, I didn't really understand what mom was talking about. When I grew old enough to be my own person, well, I wanted to be my own person. I wanted to make my own decisions, and quite honestly, I didn't see what all the fuss about loans were about. Almost everyone I knew was taking loans, and it was enabling them to get into college, get their own cars and apartments, or do many things they'd otherwise have to keep saving for, for years, till they're able to do them. Taking a loan is a shortcut to living your life.

It wasn't until I saw my friends getting into a vicious cycle of debts that I understood. If you act irresponsibly in taking loans, that shortcut to living costs you more than you can afford.

What I Learned About Loans

Understanding the True Cost of Loans

The problem with loans is that, it's never just the amount of the loan that you need to pay back. It's the interests that keep on adding up, the savings you could be making, and in the worst case scenario, it's the limitations the debt puts on your freedom.

When you decide to take a loan, you're signing a long-term contract of giving up a good portion of all of your future income. Without going all philosophical and talking about how unpredictable the future usually is, you'll still be putting yourself tight on budget for quite the long while.

But as with everything in life, mom was also right about the fact that if we're responsible and smart enough to manage our expenses, taking a loan doesn't have to be as scary as it seems.

Is Amortization a Better Option?

Amortization makes the loan look all the more attractive. You'll be able to afford, let's say a new car, with a lesser amount of monthly payments spread over a longer period of time. The true cost of the loan in this case is the total amount you pay, which increases with the increasing period due to the ongoing added interests. You'll also find that the longer the time period, the higher the interest you'll be paying.

In such cases, it's better to weigh your options and do your maths. Will it be better if you take the loan as it is and pay it off with lesser interests? Or does it suit you better to reduce the monthly payments even if the interests will be higher?

The Key Is Being Responsible

That being said, you'll find yourself sometimes hard-pressed and in need of urgent money. This is where loans come in to offer you a helping hand. Luckily for you, there's a big variety of options you can choose from.

Not all loans are the same. Some are short-term, others are very long-term. Some loans come with much higher interests than others. Some loans are designed for a specific purpose (e.g. helping students with their tuition fees). You'll also be able to find a reliable website or two that'll provide you with all the details you need about same day payday loans. You'll have to do some research to explore all of the options, but eventually, you'll be able to fit the best option that fits your needs.

Taking loans might be scary because of the consequences, but if you take the loans responsibly and you have a solid plan of how to pay them back, you'll find a great savior in them.  

It took me getting into real life and understanding how it works for me to finally realize that mom was right about loans. If you opt for taking loans everytime you want some extra cash, your future-self will be in big trouble. If taken responsibly, however, loans can offer you the means to make the best out of life in your time being. So before deciding to take such a decision, you need to understand the real risks, weigh its pros against the real cost of the loan. Once you've done the maths correctly, you'll be more confident of making the better call.