Times when Saying No to a Loan is the Most Sensible Thing to do ...

1. You're Already Struggling to Pay Bills

If you're just getting by every month and you don't have a lot of disposable cash, getting a loan is a recipe for disaster. It's crazy, but some people get loans when they're not 100% confident in their ability to repay. Remember, just because a lender approves your application doesn't mean you can afford a loan. Lenders only take into account your income and the debts listed on your credit file. If you have high insurance premiums or if you're paying a lot for daycare, this reduces affordability.

2. You Don't Have a Savings

Before getting a loan, ask yourself – how's my savings account? Many people don't have enough saved to handle one emergency. Since getting a loan implies disposable income, you might hold off applying for a loan and put extra cash toward building your savings account.

3. You Need a Joint Applicant

If the bank won't approve your loan application until there's a cosigner, consider this a sign that you should postpone getting financing. When someone cosigns a loan, they're putting their good name and credit at risk. If you default or make late payments, this can hurt their credit score and ruin your relationship with them. It's safer to wait until you can qualify for a loan on your own.

4. You're considering Alternative Financing

There are a few options available if you can't get a bank loan, such as a title loan or a payday loan. I'm in no position to tell anyone what's best for their pocket. Maybe you're desperate and running out of options and feel alternative lending is the only way. Just make sure you understand the terms. These loans can have very high interest rates, and if you don't repay a title loan, you can lose your vehicle.

5. You Have a Low Credit Score

A bank might approve your loan application if you have bad credit, but you'll also pay a much higher interest rate. Higher rates mean you'll pay more for your loan. If you improve your credit score first, you may qualify for a better rate and save money.

6. You Don't Have Collateral

Some banks do offer no collateral loans, but because these loans are riskier, they also feature higher interest rates. You can get a better rate and save money by pledging collateral, which is personal property equivalent to the value of the loan. This can include electronics, jewelry, a savings account, etc.

7. You're Planning a Vacation or Wedding

I know it's tempting, but think twice before financing a vacation or wedding. Getting a loan for a vacation means returning home with new debt, and if you finance your wedding, the loan might outlast the marriage. In either case, you're better off saving your money and paying for each outright.

Getting a loan puts the things you need within reach. Just know there's a cost for instant gratification. What are other reasons to say no to a loan?