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3 instances when it is not a good idea to take out a personal loan

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Taking out a personal loan is a good idea when it is for something that you will not be able to save up for, or when it will take you too long to save that amount of money. However, there are times, such as the three listed below, when a personal loan can put even more of a financial strain on you. These are:

1. When you want to use the personal loan to pay off another loan

The only time when it helps to take out a personal loan in this case, is when you have a few loans that you want to consolidate. Otherwise, using it to simply pay off one loan is not a clever idea at all, because you will end up paying out a significant portion of your hard-earned monthly salary in interest payments to your bank.

2. A student loan

Rather than take out a personal loan to pay off a student loan faster, if at all possible, simply double, or even triple, your monthly student loan payments.

3. When you need extra spending money

Instead of taking out a personal loan if you want extra spending money, speak to your employer about letting you work some overtime, or perhaps take out a part-time job to earn a bit of extra cash. There is no point in using the entire personal loan in one go, and then have to spend the rest of the year, or longer, struggling to pay it all back.

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