Some people are afraid of dealing with loans. There is a popular bias against loans rooted in tragic experience of people who did bad on their debts. We often hear that one should live within his means. And if someone takes short-term loans, it means they do badly financially. For this reason, the middle class here in Kenya prefers to keep their small cash loans a secret even from their spouses. So are loans good or evil? The question has many shades of grey, and the answer depends on circumstances and how we use it. Let’s look at the situations when loans justify themselves. Especially if they are low-interest loans…
When are low-interest loans a good idea?
Imagine a situation that you need something now that you’d afford only in the future. If you choose to live only within your means, you’ll get what you want one day, but you’ll have to wait for years to get it. The quality of your life would grow very slowly. On the other hand, if you decide to apply for a loan and get financing for your dream, you’ll fast-track your growth. Does it mean loans are good in 100% situations? The golden rule to find out whether a loan is good or not is to see whether it gives you any sort of return.
Let’s look at these examples.
a. You dream about a house. You can save for like 30 years and then buy it outright or take a mortgage today, move into a new house and enjoy a full life paying off the debt plus interest.
b. Your car breaks down (or you get into an accident). You have no money for its repair now. You have a choice: to use public transport for a couple of weeks or take one of the instant payday loans available, fix your car now and continue to enjoy your comfortable lifestyle.
The important thing to take into account here is the interest rate. If you rent an accommodation now, chances are your rental for 30 years will cost you way more than an interest rate you’d pay on a loan. So, with low-interest personal loans, you actually reduce your cost of living increasing its quality at the same time. In a case with instant payday loans, the rate is usually higher. However, if your time is money and you cannot “afford” long commutes on public transport every day, then taking a loan is sensible
The key here is to approach loans realistically based on this checklist:
- if your flow of income is steady and sufficient for monthly payments;
- if the loan institution you choose is trustworthy and reputable
- if it offers low monthly payment loans;
- it’s honest in a description of its loan terms, and you understand them well;
- your calculation of what you are to repay is worth the return (value you get), then
go for it!
Why are low-interest loans good?
Many people consider loans as undesired or “desperate measures”. However, in reality, the right loan is able to improve the quality of your life by helping you spread the key payments and taking off the pressure. Low-interest personal loansare good means if you approach them reasonably and use the right credit facility.
Why apply for loan online?
We advise you to look for low-interest loans online. Why? Online facilities and mobile apps offer more comfortable interest rates than banks.
Where to apply for a loan?
There is a wide choice of personal loans online, so everybody can get comfortable financing for their needs. For example, with MOMBO App, you can decrease your interest rate to 12% for long-term loans (up to 48 months) if you take loans against your savings. The rate will be higher for unsecured short term loans (6 months max), but it’s still remarkably low as compared with rates of traditional banks.
On our way to a better life, we should not shy away, but analyse the opportunity cost of taking loans. Loans are good means if used in a good way. We have had clients who have taken quick loans with us since 2013 and are still doing well financially. Others took only once and failed completely. It means we should always self-estimate our capabilities and borrow sensibly for right purposes