At first glance, home loans are a quick and easy source of cash. If you are a homeowner, it might be tempting to use your home whenever you run into some financial trouble. However, you see a lot of horror stories all over the Internet of people who lost their homes and basically everything because of home loans.
So are home loans evil? Well, of course not. It still stands that home loans offer borrowers a lot of benefits, but getting a home loan is extremely risky.
Where the Problem Lies
One of the biggest advantages of home loans is the payout, but this is where the problem lies. A lot of people put their homes up as loan security for the most minor of reasons. According to experts, it’s better to use home loans for something lucrative, like starting a business, because a business is guaranteed to bring in additional income later on. It is better used as a last resort, not the first thing you do when you’re out of money.
The problem is people think of their homes as a quick get-out-debt card, or as an ATM to be used when they need money. Generally, lenders aren’t finicky about your reasons for taking out a home loan, but ideally you should only do it for the following purposes:
To consolidate large outstanding debts
To repair, renovate and improve your home in preparation of home sale
To purchase a new home
To start a business
Small reasons and purposes will most likely leave you with a lot of leftover funds, and the temptation is almost always too much for the average bloke. Most people spend the extra money on unimportant things, while forgetting that there is a heavy consequence for non-payment: home repossession.
Also, because home loans are so popular, a lot of scam companies have appeared in the UK, trying to make money off of gullible homeowners. Most of the time, these scam companies undervalue your home, leading to a lower payout. Also, they impose high interest rates in hopes of making as much money from the transaction as possible.
All in all, home loans aren’t evil, if placed in the right hands. Because of the huge responsibility that home loans bring, it’s not for everybody. If you easily fall to temptation or fail at managing your finances properly, a home loan might be too much to handle for you.
If you really want to take out a home loan, get quotes from lenders so you have a rough idea of how much you’re going to get from it. Then create a budget, making sure each and every pound is accounted for. This will prevent you from spending it on unnecessary things.
Also, reevaluate your intentions and your purposes. If you’re going to get a home loan, make sure you put the money into something that will make it easier for you to pay it off. If all you need is a smaller amount of money for emergency purposes, you can search for alternatives instead. Logbook loans and payday loans are great if all you need is a quick boost in funds for one specific minor expense. Companies like TopLogbookLoan can give you access to same day logbook loans for emergency purposes, so you can save home loans for situations that truly count.