As the saying goes, life is what happens when we’re making other plans.
And sometimes, the unexpected requires that we access some extra cash to cover bills, repairs, or any type of unforeseen expense.
Often, this is when people go looking for a loan.
But before you borrow money from anyone, you must consider some important things.
Borrowing without understanding what your loan will actually mean for you — over the short and long-term — is not a good idea.
So before you sign up for a loan — from anyone, even if it’s a friend of family member — always consider the following:
Match the interest rate to your goals
The interest rate is the number one variable you need to consider when you take out a loan.
It dictates what your repayments will be.
The lower your interest rate, obviously, the lower your repayments will be.
Generally speaking, personal and business loans will offer you a much lower interest rate than a short-term, pay day-style loan.
It’s important you determine whether the interest rate will suit your financial goals over the term you agree to repay the sum you borrow.
Will borrowing negatively impact your credit rating?
Borrowing money, in itself, is generally not bad for your credit rating.
Failing to meet repayments is what damages credit ratings.
Whereas paying back your loan on time can actually improve your rating.
So when you’re borrowing, if you’re in any doubt as to whether you can afford to make the repayments, consider that if you can’t…
The next time you apply for a loan, it may result in you having to accept a higher interest rate.
This is why it’s so important to…
Understand how your repayments will affect your budget
Before you borrow money, make sure you adjust your weekly or monthly budget to ensure that you can still afford you current expenses.
You should still be able to afford all your regular expenses when you add the repayments into your budget.
If that’s not possible, you need to discuss with your lender if there’s another term or structure for the loan that could make it feasible.
And, if you’re in doubt, we always encourage you to seek independent, professional financial advice.
If you have any questions about obtaining fast, fair finance, we’re always happy to help.
Get in touch with us on 0800 461 228 or email us directly at [email protected].