‘Who owns a personal loan, the borrower or the lender?’
The answer depends heavily on perspective. Creditors will ultimately get the entire amount owed back, and then some. The borrower is obligated to pay, which in a sense, puts the ownership ultimately to the lender. On the other hand, borrowers can spend all the money they take out on anything, which gives the impression that the debtor owns the loan — freedom and all. Again, it depends on perspective.
One thing is not reliant on perspective, however, and that is whether a borrower responsibly spends the money they borrow. Take the following circumstances, for instance:
Good: Borrowing to pay for school or other education expenses.
Nothing defines an appreciating asset quite like a degree. If there ever were a time to take out a personal loan, when school expenses are due would be the most appropriate time to do so.
Bad: Borrowing to pay for vacations or consumer goods.
On the other end of the ‘responsible spending spectrum’ lies depreciating assets — things satisfy but never really manage to recoup their preliminary value. Personal loans are not indulgence funds, and the quickest way to fall into a cycle of debt would be to borrow money for needless expenses.
Good: Borrowing to consolidate debts.
Professionals from Rapid Loans mention that the criteria for good and bad personal loan purposes extend beyond appreciating and depreciating assets. They cite debt consolidation as a prime example of this, as it allows people to have one single personal loan to pay off instead of numerous debts with their own interest rates running.
Bad: Borrowing to pay for a lavish wedding.
While it is true that women are better spenders than men are, weddings appear to be that one day in every lady’s life when budget cuts are a mortal sin. But, couples should consider their financial situation before getting married, as starting life together is never easy when matrimonial debt is what kicks it off.
Borrowers are free to spend money as they please, but for the lender’s sake as well as their own, putting thought into every expense would go a long way in ensuring that the personal loan was something worth pulling from one’s future earnings.