Getting a loan should never be an easy decision. You need to consider whether you really need the money and whether you will be able to pay it back. When you choose to get the loan can be crucial both with regards to the economic situation and your lifestyle as to whether repaying it will be easy or hard across the full term.
It is not always easy to judge when the best time is to get a loan. Predicting what may change in the future can be almost impossible, but you can make some estimations as well as looking at the current situation. For example, if you are planning a family, then you know that your costs will go up and so it may make a loan difficult to manage or interest rates are very low, then they will be likely to go up and this could make the repayments harder in the future.
It is worth making sure that you start by considering every type of borrowing. It isn’t just mortgages or personal loans, which should be thought hard about but also credit cards and overdrafts. They all cost money and will need repaying and you need to consider whether you are in the right position financially and whether the economy seems in the right place for you to risk borrowing the money.
You should start by considering your currents situation and whether you feel that you would be able to manage the repayments. If you cannot then a loan is not a good idea. If you can manage now, calculate how much you could afford for repayments to go up by before you would struggle. Then calculate how much interest rates would have to rise for the repayments to be this high and work out how likely this is. Remember that as inflation will go up too, then you may have less disposable income because prices will rise and there is no guarantee that you will get a pay rise.
It is easier to predict what might happen to you financially than it is the economy. It can be best though to plan for the worst in both situations. Imagine that the interest rates rise a lot, you do not get a pay rise or worse, lose your job and think about how you might manage. This will be more relevant if you have a longer term loan than a shorter term one. It is easier to predict the short term as you know what your job security is like and that there will not be major changes in the economy in a short term.
It is worth thinking about your future as well and how well you think that you will be able to cope with repayments then, especially if it is a long term loan that you are borrowing. Consider whether you will be thinking of having a family, retiring, buying a home, travelling or things like that that will have either a big impact on your income or on your spending. Having a long term loan could tie you down to having to work so that you can manage the repayments; it may restrict your ability to get a mortgage and may mean that you cannot afford to start a family.
In conclusion, there is never really a good time to get a loan because the future is so unpredictable. However, it is best to calculate your repayments and think hard about whether they are something that you can afford now and whether you will cope if they go up or your income goes down in the future. It is safer if you have more than one income in the household as the loss of a job will not be so devastating. Consider your plans for the future as well to consider whether these may be affected by loan repayments. It is therefore always worth considering whether the loan is a good idea at all. Think about what you need the loan for and whether you would be better off saving up towards it rather than borrowing the money or delaying the purchase until you are really sure that it is a good time to borrow. You may find that if you delay, you may even change your mind about having it after all.