Can A Loan Ever Be A Force for Good?


A debt-free life is one so many of us crave. The perception of being in the red, and the stress that comes with it, makes it a territory so many of us avoid at all costs.

Unfortunately though, being in debt is a reality that escapes precious few, as, despite stable inflation and recovering wage growth, we currently face crippling costs of living in the UK.

Yet are loans necessarily the suffocating financial straitjacket they are often made out to be? Or can they be an enabler, broadening the limits of the age-old cliché of ‘living within your means’?

Certainly, the merits of borrowing money to fuel rash spending are hard to come by. But the truth is that the market for credit is as diverse and consumer-friendly as it ever has been, and both businesses and individuals are using loans for the greater good, and to proactively take control of their finances.

So When Can Loans Make/Save You Money?

Debt consolidation loans are one example which is growing in popularity; the principle of which is simple yet effective. By taking out one sizeable, low-cost loan to pay off all your outstanding debt (including costly items such as credit cards), you can save a fortune in interest each month on your debt repayments. In addition, no longer having to juggle different lines of credit, with different repayment amounts and different repayment dates is a significant stress eliminator. The Guardian’s debt consolidation calculator works out whether or not this would be worthwhile.

In addition to consolidating debt, loans for things like home improvements and career development can add value, while even borrowing for things like dream holidays is having a positive impact on ordinary consumers’ lives without leaving the scars of debilitating repayment plans in the long run. Rather, in a borrower-friendly climate, the shackles of a monthly budget are no longer the sole dictator of what you can and can’t afford.

The Value of Peer-to-Peer Lending Platforms

So where to find this low-interest, golden goose of a loan? You might be surprised to find that it actually isn’t all that difficult. One look at a price comparison site demonstrates how the landscape of consumer finance has changed. The dangerously overpriced payday loans lenders no longer holding as much weight. Instead, alternative lenders such as peer-to-peer (P2P) platforms have come to the fore to offer affordable and convenient loans.

Such companies generate their value through the direct matching of funds from consumers willing to lend their money with those folks seeking a loan. Cutting out the intermediary from the equation means that the lender benefits from a return courtesy of repayments usually in excess of 5%, while the borrower pays off the loan at an APR not too dissimilar from this aforementioned figure.

Furthermore, P2P lenders pride themselves on convenience and efficiency, with it needing just two minutes of a loan applicant’s time to complete an online application form. A decision on approval is then sent within a working day, and, if affirmative, you can expect the funds in your bank account almost instantaneously.

These loans typically offer a good degree of flexibility too, with the option to borrow anywhere between £1,000 to £25,000, and a choice to pay it back over a period ranging between 1-5 years – whatever suits you best. And some platforms like Lending Works even permit you the opportunity to make overpayments and early settlements at no extra cost. Indeed, other than a once-off nominal admin fee, no reputable P2P lender is likely to have any sneaky fine-print or hidden charges.

Of course, it goes without saying that not having to turn to credit to fund all the ventures highlighted above is prize number one. But while a debt-free existence is the primary aim, the point to take note of is that debt need not be the intimidating spectre it is often made out to be.

So if getting a loan is an absolute necessity, don’t be afraid. Just be sure to do your research, so that you find the best possible deal in what is an increasingly competitive, budget-friendly market place.


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