Loans are a convenient method of gaining some extra cash quickly, whether you’ve had a bit of a financial emergency or you need extra funding for a project or purchase such as buying a new car, renovating your home, or furthering your education. However, whilst the option to borrow can certainly come in handy for many people today, failing to be a responsible borrower can bring up all kinds of problems in your life, from being unable to borrow money again in the future to having bailiffs knocking on your door to take your possessions.
So, before you apply to borrow any money, it’s important to be aware of what it takes to be a responsible borrower and be assured that you can do it. We’ve put together some top tips to help you borrow money more responsibly and stay out of financial trouble.
Tip #1. Know Your Budget
When it comes to borrowing money, it can be very tempting to take a higher amount, especially if offered. However, bear in mind that any money borrowed will need to be paid back in the future, so it’s crucial that you’re sure you can afford to pay back any loans, credit cards, or other forms of finance that you take out. The best way to do this is to get a monthly repayment figure from the lender and then work out your monthly incomings and outgoings to see whether you’ll have enough income to cover the repayments, as well as everything else. Bear in mind that whilst you can try and cut unnecessary expenditure to cover the cost of a loan, you should never sacrifice your priority bills such as rent, food, and utilities to repay a loan back – this could lead to even more problems for you.
Tip #2. Ensure You’ll Be Accepted
When it comes to applying for a loan, one of the biggest mistakes that many people make is to simply continue applying for various products until they find one that they are accepted for. However, the problem with this is that each time you are rejected, your credit rating falls temporarily, meaning that the next time you apply, you’ll be even more unlikely to get accepted for the loan. The best way to combat this issue is to check your credit report before you start. This will give you a better idea of where you stand with lenders and the type of products that are the most likely to be available to you. Some loans companies will also offer eligibility checkers that allow you to see whether the loan would be available to you or not, without the need to take a credit check first.
Tip #3. Do Your Research
Whether you are looking for a small, short-term loan or a longer-term, larger loan for a huge purchase, it’s important to shop around and do your research beforehand to ensure that you are getting the best deal. Try and find a loan that requires you to pay the lowest amount of interest; this will mean that more of your monthly repayment is actually paid towards the capital rather than in interest to your lender. The good news is that the internet has made it easier than ever before when it comes to finding the best loan deals; you can find several comparison sites that can be used to find the most suitable products for you within a matter of minutes.
Tip #4. Set Up a Regular Repayment
When you borrow a loan, you’ll most likely be given the option to set up a regular repayment, for example, a monthly direct debit that is taken straight from your bank account. It’s a very wise idea to take the opportunity to do j this since a regular, automatic repayment means that there will be little chance of you forgetting to make the payment and causing problems for yourself that could have been avoided. Bear in mind that along with missed payments, late payments can bring up a red flag on your credit report and too many of them can even make it more difficult for you to get credit in the future. You may also be charged extra for making a late payment, so it’s a good idea to set up an automatic schedule to pay on time.
Tip #5. Pay off As Much as You Can
After borrowing a loan, if you find yourself in a position where you can pay a larger amount than your usual monthly payment to get the balance down, then it’s a really good idea to do so. Clearing a large percentage of the balance of your loan will not only bring your future monthly repayments down significantly or shorten the repayment time frame; it will also look great on your credit report.
Did these tips help you? We’d love to hear from you in the comments.
*Collaborative*
Image source: Pixaby
OhNikka says
Love your tips and great reminders how to budget and give back the money you borrowed.
Anosa says
Thanks Nikka, hope the tips were useful
Cyn Gagen says
These are really great tips! I like to pay more than the minimum too – it’s a great way to get that payment paid off fast.
Anosa says
I am the same, minimum is not the best idea as once interest is removed its like you haven’t paid anything at all so I always pay a little more
chubskulit says
We always pay more than the minimum so we can pay it off past. It’s a great way to spike up your credit score too.
Anosa says
Exactly, it’s something I learnt after I paid off my university debt. It helps the credit score if you pay more than the minimum
Cheryl Vivian | neurotic baker says
I try to set up automatic debt whenever possible. It makes staying within your budget easier.
Ann Bacciaglia says
It is so important to do your research and make sure that you do not borrow more that you can handle. Having a budget will ensure you do not get in debt.
Marysa says
Borrowing money can be a slippery slope, you never want to end up in debt or indebted to a person. These are good tips if you are in that situation.
Pam W says
These are great tips for anyone who has to borrow money. Paying off more than is expected is always good when you can.
Jenn Padgett says
These are great tips to go by. My husband and I do whatever can to not borrow money, but I think everyone has had to at some point in their life.
Dogvills says
I avoid borrowing money or use my credit card because I always find it difficult to pay it off knowing I am being charged an interest rate that I feel is too much. If I want something, I save up for it. In emergency cases, I tap into my savings. I will share this tips with my sister who believes credit cards are the most convenient invention ever. 🙂
Jenn @ EngineerMommy says
These are important tips for being financially savvy. I always try to pay off our credit cards each month.
Miss Angie says
Thank you for sharing! I’m terrible with money, but mostly because I get anxiety really bad and if it’s not easy for me to just set up a recurring payment it doesn’t happen. I hate when they don’t allow that!
Jeanette says
These are some pretty good tips. I am very good at budgeting now. And I follow all of these rules. This is the best way for you to save money too.
Mimi "MimiCuteLips" Green says
When I got my car loan I had already worked out my budget ahead of time. I also believe in paying it off early. I pay bi-weekly and I pay a bit more then the monthly amount. This shaves off some interest.
Candy Kage says
Some people have to start with making a budget. All starts with knowing your budget and knowing what you can afford.
Heather D. says
Knowing your budget is key when taking out a loan. You can be approved for loans you cannot afford!
Sarah Bailey says
These are some awesome tips, it can be so easy to fall into the trap of not being a responsible borrower and everything getting completely out of hand.
Tomi says
Great tips! Debt management is something I wish was a required course for high school and college students. It’s so important to learn the reality of what you can and cannot afford.
Alli Smith says
Doing research before borrowing money is a great idea. Knowing your budget is another. I’m not one to borrow money except for big purchases like a house. These are all wonderful tips!