Borrowing options like instant loans, car loans and instant decision credit cards can be very handy in some circumstances, on the other hand getting into debt can become one big struggle it’s difficult to break free from. Here are some drawbacks to consider if you’re thinking about taking out a loan.

Expensive repayments

When you take out a loan, you need to remember it’s not just the loan amount you’ll be paying back. There will be a substantial increase on the initial amount you borrow due to the high interest rates applied to most loans, such as instant loans, car loans or payday loans. So whatever you’re taking out the loan to pay for, be it a holiday, a new car, new furniture or anything else, bear in mind the real cost of that purchase is likely to be far higher if you take out a loan instead of saving up over time.

New cars decrease in value

The most common reason for taking out a loan is to pay for a new car. But try not to be taken in by flashy advertisements for the latest model. Many people don’t realise how quickly new cars depreciate in value, meaning your initial investment is likely to be worth nowhere near as much the following year. It is usually far more economical to purchase a second-hand car, as these will tend to cost you a lot less and retain their value for longer. This may require a bit more research in terms of making sure the car is still in a good overall condition, but could save you many thousands of pounds for a vehicle of similar quality to that of a new car.

Saving money is cheaper

It may sounds like the less appealing option in the short-term, but saving money for a time is likely to be a far more sensible way to raise the cash you need for your purchase. Unless you are in urgent need of the cash, there really is a lot to say for old-fashioned belt-tightening. By saving, you will not have to pay back high interest rates, meaning your overall expense will be less. You will also not be weighted down by the ongoing problem of debt, which may otherwise have a serious impact on your everyday life for a long time to come.

Lenders won’t always have your best interests at heart

You might have offers of all kinds of instant loans and instant decision credit cards left, right and centre, with seemingly attractive repayment options and little in the way of obvious drawbacks. But you need to be cynical and remember that lenders won’t necessarily have your best interests at heart in making these offers. The benefit for the lender will be in gaining back high interest repayments over time.

Interest free credit cards and loans only apply for a certain time

Even if there is a payment holiday on your instant loan, or an interest-free, instant decision credit card up for grabs, this will only be for a limited period and the lender’s trade-off will be that a large enough number of their borrowers will not pay back the loan in time and will be forced to pay back the cash with exorbitant interest rates on top. However attractive the offer may seem, always consider how quickly the tide will turn if you find yourself unable to make repayments in the future.

Author Bio: Credit Choices give advice and information about financial products such as instant loans and instant decision credit cards.

Category: Finances
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