It would be lovely if we always had enough money for the things we need, but that is not always the case. Whether it is for a home, a new car, a large purchase or to pay for education, most of us will need to borrow money from time to time. This could be as little as a few dollars for groceries, or up to thousands of dollars for a larger purchase.
However, you need to tread lightly when borrowing, and only do so after some careful consideration. You should always borrow money affordably and from a lender you can trust. In an effort to help you out, here are some helpful tips to make sure you are borrowing intelligently.
Know the Available Options
The first key to borrowing money intelligently is to make sure you know the options you have. The good news is that you have a lot of choices. When it comes to loans, you can choose from secured loans, title loans for bad credit, or standard unsecured personal loans. The right choice depends on your unique situation. Some people might prefer getting a secured loan for the cheaper rate, while others might not be comfortable putting up collateral that they could potentially lose.
In general, you want to go with an option that costs you as little as possible. The lower the rate and more friendly the terms, the better. Of course, if you ever go with a secured option like a title loan or a home equity loan, be sure to make the necessary payments on time and in full. If you don’t, you could end up losing what you put up for collateral.
Next, you want to be sure to shop around and consider different lenders. If you simply go with the first lender you find, you may be leaving better offers on the table elsewhere. When it comes to how you compare one offering to another, you generally want to look at the interest rates and terms. The lower the rate, the more affordable the loan will be over time.
In addition to rates, be sure to shop around based on things such as lender reputation, loan term, lender experience and how comfortable you are with a particular lender. Sure, this search can add time to the process, but is generally worth it to get a better deal. There will likely be several lenders in your local area, so be sure to reach out to as many as you need to until you find one you are comfortable with. Also, don’t forget about online lenders. They can provide a variety of benefits as well, and are quickly becoming a popular option.
Only Borrow What You Need
While there are several financial mistakes you can make, one of the biggest is to borrow more money than you need. You should know exactly what amount you need to borrow, and that is all you should borrow. With rates low, the temptation can certainly be there to borrow more for other things you may want. However, this is almost always a poor decision.
The more you borrow, the more you will be required to pay back (plus interest). Also, be sure to figure out the repayment amounts for the amount you borrow. The last thing you want is to borrow an amount that leads to payments you can hardly keep up with. If you borrow too much, paying it back can be an expensive and potentially long process, and can make saving money or reaching other financial goals nearly impossible.
Ensure You Are Aware of All the Fees
Another tip is to make sure that you are aware of any and all fees associated with your loan. While not every loan will come with a lot of fees, some will. This could be a prepayment fee, a late payment fee, an origination fee and even an application fee. While these might be small individually, they can be significant if enough of them are added on.
Many of these fees will only be mentioned in the fine print of your loan agreement or application, so be sure to be thorough when reading any contract before you sign. While some might be required, you could enquire about potentially waiving some of the fees, too.
Know What to Do If You Take On Too Much Debt
While no one wants to find themselves in trouble with debt, it happens to more people than you might think. Part of borrowing money intelligently is knowing what to do if you find yourself in over your head. This can involve reducing spending, and focusing your attention on the debt with the highest interest rate.
Some people can eventually work themselves out of trouble with this strategy and by being diligent with their spending, while others may require some assistance. If you are struggling to get out of debt, consider debt consolidation, debt settlement or another program where a professional can lend you a bit of assistance.
Keep Your Credit in Good Standing
While a lot goes into a lender’s decision on whether or not to lend money to a borrower, one of the most important things is your credit. If you have good credit and a high credit score, it gives confidence to lenders as it shows you have been responsible with borrowed money in the past. In addition to being able to borrow from a greater selection of lenders, having a good credit score can help you get more favorable terms.
Those with good credit will enjoy better rates, and are often able to borrow more than those with poor credit. Be sure to check out your credit report every now and then to make sure your credit is where you think it should be, and ensure that there are no errors.
Getting You the Money You Require
Borrowing money is something most of us will do at one time or another, but it needs to be done intelligently. By only borrowing what you need, shopping around and being knowledgeable of the available options, you can ensure that you are borrowing money as wisely as possible.