At one point or another most individuals will find themselves in the position where they will at the very least, consider borrowing money. Sometimes it is for exciting purposes such as buying a home, an exciting business opportunity, a car loan etc. Other times it might be for a medical expense, a scenario where grief is involved or to relieve a difficult situation. Regardless of the circumstance, borrowing money can be daunting.
Whilst you may not necessarily want to borrow money, there are ways in which you can do it safely with the likelihood of the debt being paid off stress free and timely is high. Here are some points to consider before borrowing money.
Golden rules for borrowing money:
- Make sure that you are borrowing for the right reasons: If ever there is a time to establish a need from a want, it’s now! Whilst we may really want something, we need to remember that it comes with the long-term cost of servicing a loan with interest. If the purpose of the debt is for something unnecessary it may not be worth it.
- Understand your financial position before meeting with a lender: In knowing your budget and understanding exactly what is coming and going out of your account each week prior to meeting with a lender, it puts you in the position to understand what the repayment will mean to your finances in the long run.
- Calculate how much you will actually pay over the course of the loan: Before borrowing, it is crucial to calculate the interest you will likely pay over the course of the loan and add it to the total amount you are borrowing.
- Get advice: If you are unsure about making a financial decision such as borrowing an amount of money, get advice. Find a trustworthy industry professional and have a discussion about your financial situation and what it is you are trying to achieve. In doing so, you might save yourself from making a decision you might regret later.
Whilst borrowing money can help you considerably, it is important to remember that a debt is a liability. In following the above rules, you can help safeguard yourself when it comes to lending.