Things Could Get You into Trouble when Applying for a Loan

Loans can transform people’s lives and can destroy people’s lives. There are people who borrow $1000 dollars and transform it into millions, and there are those who borrow $100, 000 dollars and end up losing their home. The former took a calculated risk and the latter, just took a risk. This article is all about taking the former approach; having a strategy and taking a calculated risk. You take a loan to help you make your plans work, not to dig an even deeper hole. Let’s have a look at some of the reasons loans take some people to hell and others to paradise.


Ignorance is the main reason most people get messed up with loans. They don’t do their homework or they just do something just because someone else did it and things worked out for them. One of the most foolish things I’ve seen people do with loans is taking a loan just because a friend or someone they know took a loan and ended up running a successful business or just doing something successful. People only look at one side of the story and disregard other aspects of the things that led to the success.

Not Understanding Risks

People who take loans and turn them into money trees are people who know and understand calculated risks. Taking a loan is not about borrowing money; it is about borrowing money and having a solid plan for how you are going to pay back the money. I’m sure most people assume that they are going to manage to pay back the money, but their plan is often not well thought out. They make assumptions here and there and disregard some things. With a mindset like that and you owe someone some serious cash, you are going to end up being burned. And most people who approach loans this way end up being burned.

Not Doing Research

Do your homework first and know what exactly it is you are getting yourself into. My personal approach to things like this is that if you don’t understand it or if you can’t handle it, don’t touch it. It is based on an old financial principle; never invest more than you can afford to lose.

People also don’t know the different types of loans out there. For instance, there are secured loans and unsecured loans. The former is acquired with some form of collateral like your house, car, or another valuable item while the latter is gotten without collateral. If you have a home, boat, or something else that’s valuable, you can qualify for a secured loan. Even with a bad credit score, provided the item you want to offer as collateral is lien-free, chances are that your loan application will be accepted. On the other hand, if you have a good credit score, you can easily qualify for an unsecured loan. A good credit score implies that you can handle your finances well and a financial institution will consider you someone worthy of giving that kind of a loan. Conversely, that also means that you can’t get an unsecured loan if you have a bad credit score. You see, without the knowledge of these things, you may try to apply for a loan but the application gets rejected because you didn’t know what you were signing up for, in the first place.

Relationships and Trust

Consider other parties that will be affected if you took a certain kind of loan. For instance, with a secured loan, it would be foolish to take one if you are offering your home as collateral and you are living with a partner – perhaps in a marriage. If your significant other does not know about it, it can lead to resentment and worst of all, distrust among the two of you. This is especially true if the loan leads to financial woes. Otherwise, if the loan ends up being fruitful, the sin can be forgiven, but you’ll still have sowed a seed of distrust in your partner. Do you think it is worth the risk? At least involve him or her in your plans.

A loan can save your ship from sinking or it can make things worse by hastening the sinking process. Do your homework first, know what you are applying for, and consider anyone who will be affected by the decision. Observe these simple guidelines and that loan will indeed save your ship from sinking, and instead, ensure that you reach your destination safely.

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