Are you planning to take a loan? People take loans for different reasons or purposes. And there are different types of loans to meet the demands of the teeming borrowers. There are auto loans, personal loans, mortgage loans, payday loans, student loans and business loans. Just to mention but few. The duration of loans may vary depending on the type of loan you take, the purpose of the loan and the availability of cash to repay. For instance, if you are taking a loan to buy a house, it may take longer time for you to repay than when you are taking a loan to buy a car. Also, somebody taking a payday loan to quickly bridge a liquidity gap may just have one month to repay the loan.
Loans have its upside and downside. Loans can provide you access to funds so that you can attend to some issues when you don’t have your own personal money. This means that with loans, certain things may not necessarily suffer just because you are short of cash. Loans can also help you seize some opportunities. A good example is when you take a business loan to finance a lucrative project. However, if you want to take a loan, you need to assess your situations carefully so as to determine whether taking a loan is the right decision for you. If you are taking a loan, you need to take the right type of loan, the right amount and at good terms. If care is not taken, loan can drag you into debts that you may not be able to recover from easily.

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Before you are granted a loan, some lenders will require that you pledge a collateral. The collateral can be your car, house or deposit certificates. If you are unable to pay the loan, the lender will sell the asset you pledged as collateral to recover his money. That is why it is very important that you are sure that you will be able to pay back a loan before you pledge your asset. Otherwise, you stand the risk of losing the asset. Besides, when you borrow money, the lender will charge you interest. The rate of the interest you will be asked to pay depends on where you are getting the loan from, the type of the loan, the collateral you pledge, your credit score, the amount involved and the duration of the loan. So, you need to bear in mind that you will not only pay back the principal. You will also be required to pay interest. This is where the problem lies. If you don’t pay back the loan on time, the loan will continue to grow while the interest keeps accumulating. And the interest will also continue to accumulate further interest. That is why a loan of $5,000 can grow to become $10,000. That is the power of compound interest. For this reason, it is important that you borrow money for the right reason(s).

I have highlighted below three bad reasons to take a loan. I know many people may not agree with me. Well, it doesn’t matter whether they agree. That does not stop me from saying what I think it is good as far as personal finance issue is concerned.

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Bad Reasons to Take a Loan
Wedding ceremony: According to data released by The Wedding Report, Inc. “The average wedding cost in the United States for 2017 was $25,764. Couples, on average, spend between $19,323 and $32,205 but, 50% of couples spend less than $15,000. This does not include cost for a honeymoon.” Imagine borrowing $15,000 for a wedding! Just as I always say, it doesn’t matter the amount of money you spend on your wedding day, you can’t still please everybody. Don’t spend money on wedding just to please others while at the end of the day you are depressed. Cut your coat according to your cloth. Plan the wedding ceremony you can afford. Your married life is more important than the wedding ceremony. After the wedding, if you can’t live comfortably, your marriage may be heading for disaster. Crosswalk revealed that money is the #1 reason couples cite when filling for divorce in America. The reason why money may cause more stress for younger couple is inability to meet their financial obligations due to loan they took to finance their wedding. In fact, you don’t need to borrow to finance wedding ceremony. In a study conducted by Ramsey Solutions, it was also revealed that “the larger a couple’s debt, the more likely they were to say money is one of the top issues they fight about. Almost half of couples with $50,000 or more in consumer debt say money is a top reason for arguments.” For this reason, if you still want to borrow at all, reduce it to the barest minimum. You will thank me you did. In order to achieve this, you need to carry your spouse along. Both of you should see the reasons why you need to cut down your wedding expenses. Possibly you may even be helping some people by sharing this article with them.

Lifestyle enrichment: A respected person once said, “Life is in phases, men are in sizes.” It is important for you to live within your means. If you cannot live a particular lifestyle that you desire today, that does not mean you can’t live the lifestyle tomorrow. You should be able to delay gratification. Delay is not denial. There are many things competing for our meagre income such as new phone, new swag, apartment upgrade etc. You should be able to prioritize. The fact that it looks good does not mean that it important. Even not all things that are important are necessary. You should live the life you can afford.

Gift of any kind: Why should you borrow to buy gift for somebody? It is good to give but you should only give gifts you can afford. If you borrow and you are not able to pay back the money, the person you bought the gifts for may be among those who will be mocking you. Gifts may not necessarily be a monetary or material gift. If you don’t have money to give, you may have time to spend helping the people in one way or the other. You can choose to offer free service for the person. At times, a word of advice is much more valuable than material gifts.

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In conclusion, I am not saying that you should not borrow. If you need to borrow, it should be for the right reason. Borrow wisely and secure your tomorrow.
https://myfinancekits.com/3-really-bad-reasons-to-take-a-loan/

truth well said.

ehbellsho:
truth well said.

But truth is bitter. Only few can swallow it

I think we need to add this:

Borrowing for burial ceremony: People spend so much money on burial. Ironically, when the person was alive, he/she might not get good food to eat. But after death, children will paint the house, buy expensive coffin and throw a big party with different aso ebi.

If you get a loan of N5m, would you use it to get your second degree or invest the money in business? You need to take Nigerian factors into consideration