What You Need to Do Before You Borrow Money
There’s nothing wrong with borrowing money as long as it’s done for a valid reason. But some people just want to take out a loan to buy something, travel or do some lavish spending. Even if you are chummy with a lender or have the means to pay off debts, it is best to be a wise borrower. Remember that there are underlying costs to every penny you owe, which could push you into a deep financial pit.
With this in mind, be sure to apply for a loan only after you have done the following:
Find out whether or not you need the money
Remember valid reason? Yes, it is imperative that you get into debt for a good cause or for emergency purposes. If it is for something else, you should take a pause and mull over your decision. Perhaps, you’re better off saving for something you want to buy, rather than borrow money for it. Don’t forget to think about whether or not you can afford to make the repayments. Some people borrow money because the figure gives them an opportunity to do and buy more, and then forget about what will happen in the ensuing months or years. Where will you be if you can’t pay up?
Work out the true cost of a loan
Even if you borrow money from a friend or family, interests are likely to be added to the loan amount. If you seek funding from a lender, there will be other elements that come into play, all of which can increase the money you owe. So make sure to take into account the loan amount, interest rate, length of the terms, repayment frequency, and additional costs, such as processing fee. Before you decide to borrow money, make sure to check if you can afford to pay, considering all the add-ons.
If borrowing money is the only option, don’t forget these two important considerations.