Taking out a loan is a great way to spread the cost of an expensive item over time. Without loans we would not be able to afford major purchases such as automobiles, homes and college educations. Most people rely on loans for these types of purchases which is fine; having a loan or two in your name is actually beneficial. But you can fall into the trap of taking out loans needlessly if you're not careful.



Debt overload is the main reason why people file bankruptcy. Debt overload doesn't just happen overnight. It is a process that starts with your first . The desire to purchase things now and pay for them later is satisfied when you take out a loan. At first, the process seems so easy and there is no end to the number of stores and lenders willing to let you buy now and pay later. If you're not careful, you can overextend yourself to the point that a small change in your income can financially destroy you.

Follow these tips to keep your finances in order:

• Do not take out a loan for small amounts. Christmas loans, vacation loans and other types of consumer loans are often quite small. Often, these expenses are best saved for. If you can't afford to save up for small expenses like those mentioned above, how will you be able to pay for the loan?



• Only borrow money for things you need. It can be tempting to borrow money for consumer items such as big screen TVs, car stereo systems and new furniture. If you don't need it, though, you should try to make do with what you have until you save up the money.



• Loans are great for large purchases such as a hot tub, car or home addition. Always make sure that you can afford to pay for the loan before you apply for it. Think long term. Is there anything that may come up that could affect your ability to pay?

There is no doubt that loans are a great tool that you can use to provide a more comfortable life. But you need to use loans responsibly or you may end up with more bills than you can afford. Do your homework before you apply for a . Make sure that you can make the payments over the course of the loan.

Never use a loan to make impulse purchases. If you see something you want, go home and think about it for a day or two. If you still want it after you have time to think about it, you can always go back and purchase it later.