There are lots of self-proclaimed experts and influencers online. They offer tips on how to handle loans and debt, but many of them are just downright unsound. Some might even advise you not to look for an local money lenders for your needs and instead recommend sketchy lenders.
To help you avoid them, we’ll look at different and common loan advice online and why following them could harm your financial well-being.
1. Leverage Everything
a. Max Out Your Credit Cards
Using credit cards on things you can use to make money seems wise, but it comes with its own dangers. If you owe money on your card, the interest grows quickly. And if your plan to earn money with the things you purchased with your credit card doesn’t work out, your path to success can swiftly turn into a burden, with rising costs that may jeopardize your finances.
The results of more card debt go beyond your current money issues, as it can harm your credit score, making it hard to get loans later. Though using credit for investments may seem good, the possible advantages are often outweighed by the real risks of more card debt. That’s why it’s important to think carefully and know the need to be careful when using debt for investments.
b. Applying for a Home Equity Loan and Using the Proceeds for Speculative Investments
The digital landscape has become a hotbed for products that some influencers are promoting. There are plenty of betting websites and other arrangements masquerading as investments, so be wary of products with the promise of high returns, as they’re usually scams.
Another important thing to consider is the fact that most of these so-called investments are unregulated. Consider this if you are thinking of applying for a loan using your home as collateral. It’s not something to be taken lightly.
If you default on a loan payment, it will result in a lower credit score, not just penalties and fees. To add up to this, you might end up losing your home if the creditor forecloses it for your failure to pay amortizations. Look at the numbers before deciding on whether or not it is worth the risk.Better yet, avail of investments from reputable and accredited financial institutions and banks.
What if you availed of an investment product which turns out to be a scam? Imagine losing your home after years of hardwork and toiling. Even if you get some returns, it’s going to be a far cry from what you’ve lost.
It’s easy to make claims on the internet without any proof. Always make sure to do your due diligence before availing of any product. Remember that there is no magic bullet and easy money is often a trap.
2. Ignore Your Credit Score
a. Not Building Credit
Some financial advice pages say that credit scores don’t matter or you don’t need a get a loan to build a house. They say living without debt is best, and tell you to stay away from credit cards or loans. However, a good credit score is key to getting a good loan rate, renting a house, and sometimes even landing certain jobs. If you ignore your credit, you could limit your future money options in the future and find it hard to get needed services.
b. Downplaying Consequences of Defaulting
Not paying back a loan is a bad choice that can mess up your money in a big way. Many don’t get that it can harm them financially. One of the first and most lasting things it hits is your credit score. Late payments can stick on your credit report for up to seven years, making your score drop so much. This bad credit record can make it hard to get more credit later on, for example, loans for big buys such as a house or car, or even to get a credit card or a good loan rate.
In addition to knocking your credit score down, not covering a loan may result in legal and money implications. Creditors might sue you to collect their money, and they could even garnish your pay or seize your items. Legal trials add difficulties to your money worries and can tarnish your character for years. It’s just not worth it, so make sure to avoid defaulting.
3. Payday Loans Are a Quick Fix
a. Use Payday Loans for Emergency Expenses
Some online gurus might say quick loans can fix sudden money needs. They argue these loans are fast and don’t need a credit check. Yet, such loans have high rates and big fees, trapping people in debt.
b. Rely on Payday Loans for Regular Expenses
Taking out payday loans to pay for daily expenses when you are struggling with money is a bad idea. Payday loan companies thrive on expensive loans, and struggling with money will only exacerbate your financial problems. You will wind up with money left over and the same issues if you continue to rely on payday loans without addressing why you ended up bankrupt.
Conclusion
It’s important to stay on the lookout for this kind of advice disseminated by online financial influencers that could be harmful. Avoid risky suggestions like investing using credit cards or payday loans as emergency solutions. Whatever money moves you make, do thorough research first. What you do today can greatly affect your economic fortunes tomorrow, so act wisely and consult trusted sources to make informed decisions.
