Whether You SHould Take Out Your First Loan

Paul Carcone

Facilitator
Jun 22, 2008
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South Coast
www.carconeconsulting.com
The big day has arrived, and your future is about to commence. You are eighteen and going to college, leaving your parents. You are a college graduate with a fiancée looking for a house. You’re a father looking to provide a young son with a car. Then you check your savings account…and find emptiness. If this is you, then do not despair because the modern economy has provided options for you. Now is the time to consider applying for a personal loan.

Taking out a loan is a big decision, and one not to take lightly. The first step in accessing the rationality of taking a loan is to ask yourself what you need, and why you need it. While this might seem a mundane, even trivial task to do, it is vital because loans with high interest are one of many factors that cause people today to declare bankruptcy. Your financial future is yours, and only you can take care of it the best. So ask yourself what you will need the loan money for, because there are big differences between taking a loan for pure commodity items like a TV, which you don’t need, and a car, which you will certainly need to drive to work.

If you are taking out a loan to buy a big ticket item that might contribute to paying itself off later, such as a car that can take you to work, or a house you can sell later, consider such an item as a necessity item you need, rather than what you want. A house can appreciate in value, and furthermore if you are married with kids, an apartment will get awfully small very fast. On the other hand, being single and then taking a home mortgage loan will be on par with purchasing a pure vanity item such as a TV because honestly, someone who is single can and should tolerate renting an apartment without the burden of a loan to do so. No good comes from needless debts. If what you need the loan for is not something that can in some direct or indirect way help you pay off that loan in the future, seriously consider avoiding the loan altogether.

Why should you be worried about the item you are taking the loan for? Because even though, say, taking the loan for a road worthy car might not seem like something that’ll pay for itself, it can in subtle ways over time. If you need the car to go to work, and if you have the intentions on being a stellar employee, then the car is contributing to helping you sustain your income. You need income to pay interest. The car might be worth the buy, if you are wise in choosing the car. The same applies to any number of things, such as student loans. If the education you received helped you get into, and then ace, medical school, you can be sure with a doctor’s salary that you can pay off the loan and then some.

The right time to get a loan then is when these factors add up. Will you have the ability in the long term to pay interest, and do you have any possible or foreseeable risks that might jeopardize you on that path? If your parents are old and frail, their health is probably likely to fail soon. Try to hold off getting the loan, and plan on getting health coverage for the parents instead. But getting the loan and then coverage will lead to sever difficulties in meeting all your obligations.

You are your best judge in knowing the right time to take a personal loan, but always remember loans are still a business enterprise, because profits come from interest. You are signing an obligation to pay those interests. Do your best to make sure you can hold up your end of the bargain, other wise your future will be jeopardized.
 

Nicola

Facilitator
Personally, I don't like taking loans from my parents. I try not to deal in affairs involvng money and family members at all. It only ends up in arguments and recriminations!

Whilst it may be slightly cheaper to borrow money from family members in the short term, there's a real danger you'll end up paying for it in different ways in the long run!
 

happywriter

New Member
Apr 25, 2009
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With the cost of student loans adding up fast, many students can question if they are really a good idea. Many university course have an extensive amount of weekly time when lectures are not required. It is practical, but not so enjoyable, to work to earn enough to get through the university years without a loan. The long holidays can be thought of as earning time. The end result can be a difference of a big debt, or none.
 

Georginazn

Moderator
Apr 22, 2009
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My daughter is really good with money and came out of Uni with her bank account in the black, and just her loan to repay. She had bar jobs and holiday jobs throughout. She is just beginning repayments after 3 years in work and seems okay with it.
My son has just finished his first year and has his loan, and a maxed out overdraft. He works every weekend and will continue to do so through the holidays. I dread to think what he will owe at the end.
We pay his rent and fees and help with clothes and travel, plus extraordinary expenses. Its crippling!
 

happywriter

New Member
Apr 25, 2009
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It is interesting to note that the people who decided that higher education should be charged for benefited greathly from the education grants which were available at the time they were in university.
A growing number of students are now demanding a "students' charter" stating their number of lecture and one-to-one hours per course, as they consider that they are receiving less teaching for more fees.
 

Chutzpah

Moderator
Jan 9, 2009
618
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twitter.com
I would agree with that... when I went to university I assumed I would receive a lot of contact with tutors. What I actually found was 'seminar' groups with a higher number of students than my a-level courses! I appreciate that I was on a popular course but this was outrageous.
 

Georginazn

Moderator
Apr 22, 2009
290
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As a mature student I too was very disappointed with tutor/student interaction. When you walked down the corridor where the tutors had their offices, doors would close like a Mexican wave and promised 'regular tutorials' never happened. Now I would be demanding, then I was just saddened and stressed. People kept saying they were 'researching' - but surely education is what they are paid by the tax-payer for? I don't really want to pay for research into pedagogic phraseology in the public writings of Sumerians .
 

happywriter

New Member
Apr 25, 2009
299
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In this situation, students have paid for a service - education. If that service is not provided, or is not 'fit for the purpose' then it must be against consumer laws and appropriate correction action should be taken.
 

BigTom

New Member
Aug 19, 2009
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This came up on a different forum I use. The American view is very much that you've paid for the education so if you're dissatisfied you should be entitled to some or all of your money back.

Over here I think we're somewhat more reticent when it comes to something that's partially subsidised like university/college. Nonetheless, the same principle applies and I think we should demand higher standards. My experience of higher education was that most of my money went into bureaucracy, and very little of it into education. When I as a customer complained at the options available to me I was mostly ignored.
 

Chutzpah

Moderator
Jan 9, 2009
618
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twitter.com
On to the good the news, last year I paid £575 towards my student loan, which accrued £568.70 of interest.

So I paid off £6.30 of my £15400 loan. Woo-hoo! I'm getting there... one step at a time ;)
 

Rachelle

New Member
Apr 25, 2009
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Chutpah, that is so depressing! You have inspired me NOT to work out how little I am paying off of my credit card each month as I am doing interest only. I know I know, we're not meant to do that but unfortunately, needs must!
 

ZacColbert

New Member
Jan 29, 2011
17
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I got a maintenance grant from the student loans company but didn't cover all my living expenses so looked at what the banks offered however their packages weren't appealing so decided to try a prepaid credit card and haven't looked back since!
 

ZacColbert

New Member
Jan 29, 2011
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They obviously lack certain advantages to student accounts but i found prepaid credit cards more suitable as a student seeing as i could only spend the actual money i had on it, so i couldn't go over-drawn even if i wanted to.
 

HEDGEHODGER182

New Member
Apr 23, 2011
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Dont do it, You'll be paying it back for years to come, I tried telling this to the grand kids !, did they listen, did they eck ! :mad: