Guidelines for Safer Borrowing
"A loan can be a godsend in tough times and a convenient way to
improve your quality of life, but it's important to remember
that it comes at a cost. That's why you should consider
following these guidelines for safer borrowing to make sure you
don't let debt get out of hand.
The monthly installments you pay for a loan might not seem much
at first glance, but don't forget that you would be making those
payments over several months or even years. What you pay back
will always be more than what you borrowed - often many times
more. That is because of the interest, fees and other charges
lenders levy through the life of any loan.
Keeping the following guidelines in mind when planning to take a
loan or paying one off should help you stay on track.
Think about whether you really need a loan : Do you really need
to borrow to money or would be better served saving for a few
months till you can afford to buy whatever it is you are
planning to. Keep in mind that buying with cash is much cheaper
than using a loan to fund a purchase. You especially need to
assess whether you can afford to pay a loan off.
Find the right kind of loan : If you decide on borrowing, look
for the right type of loan for you. Take only a short-term loan
for relatively small expenses, for instance funding a vacation.
The monthly repayment on a long-term loan might be smaller than
for a short term one, but it works out a lot more costly because
you pay it back over a much longer period.
Don't forget to shop around : You must compare the interest
rates of various loans for identical terms before selecting one.
Always check the annual percentage rate (APR). The loan with the
lowest APR will be the cheapest. Find out about fees and other
charges that lenders levy. This would protect you from getting a
rude shock if the lender suddenly demands a charge that you were
not aware of.
Look for flexibility : This is especially important if you are
taking a long-term loan. Your financial situation might
fluctuate over the years. So look for a loan that would allow
you to pay back more than the agreed monthly sum when you can
afford to and extend the period of repayments should you be in
financial difficulty.
Don't skip payments : Missing or delaying repayments is the
easiest way to get into trouble. Do not skip a single payment
because that adversely affects your credit rating, making it
difficult for you to borrow money in the future.
Keep debt in check : Borrowing too much at the same time is a
recipe for disaster, so try to prioritize and preferably take
loans only for things that are absolutely essential - like
buying a home or a car. If you have trouble paying off your
debts, speak to the lender and explain your situation. Often
lenders are sympathetic and agree to rearrange repayments on
easier terms. If that doesn't happen, consider refinancing your
loans at lower interest.
Complying with these guidelines for safer borrowing will keep
you out of trouble. "