Thinking of Taking Out a Loan Right Now? Here’s Why That May Be RiskyJuly 6, 2022
As you’ve probably heard at least 1,000 times, no one can see the future. As much as analysts would love to be the ones to predict financial downturns and recoveries correctly, predictions are famously “iffy.”
As you consider whether you’re ready to take on new debt, these common risks may provide food for thought. Taking out a loan right now is risky if:
- You don’t have an emergency savings account. If you don’t have enough put away to pay at least three to six months’ worth of bills, a new debt could put you in a hole if anything bad — like another pandemic or job loss — happens.
- You haven’t developed a monthly budget. If your budget involves flying by the seat of your pants instead of knowing exactly how much you can afford each month and planning for the future, now may not be the time for a new debt.
- You couldn’t cover an unexpected expense without using a credit card. Unless you have the cash to pay living expenses and cover an emergency or two, taking on new debt is a risk.
- You often borrow money to get through the month. If you’re borrowing money from friends and family, it’s an indication your monthly budget needs an adjustment.
- You’re in a new job and unsure if it’s a good fit. Going into debt can tie you to a job you do not enjoy. Make sure you like what you’re doing before taking out a loan.
- Your job is not secure. If your job is shaky or you work for a company that conducts layoffs at the first sign of an economic slowdown, think twice before taking out a loan.
- A loan would prevent you from doing something else you want to do. Let’s say you dream of taking a vacation at least once a year and taking on new debt would mean giving up that dream.
Things to consider
Before making a final decision, take a moment to consider whether the economy is…