No one particularly wants to be in a position where they have to borrow money but unfortunately sometimes life just happens and we need a helping hand. If that’s the case for you then rest assured it is nothing to be ashamed of. There are lots of ways you can get you hands on extra cash when you need it but some are much safer than others so please do be careful. If you are in need of a loan then here are 4 things you should consider before borrowing money…
Only borrow what you need
Make sure you work out exactly how much it is you need to borrow and what that money is for. Many lenders will tell you that they can lend you more money but this will only get you further in debt. It is not free money, you will need to pay it back and the more you borrow the more your monthly repayments will be.
Read the Terms and Conditions
Always make sure you read and, more importantly, understand the terms and conditions of the lending contract. If there is something you do not understand then ask for clarification as once you have signed it you will need to adhere to all the terms and conditions regardless of whether you actually read or understood them, so make sure you do.
This is still the case even if you borrowing money from friends and family. You should always make sure that you have a contract when money is involved as it will protect your friendship in the long run. Check out this sample loan agreement between friends if you are unsure what to put in yours.
Make sure you can afford the repayments
Calculate how much you can afford to pay back each month and stick to it. Do not sign an agreement if you can not make the repayments as the debt will quickly mount up and you may also have late fees or additional charges on top of this. It is also advisable to get your loan over the shortest period of time possible so you can pay it off quickly. If you have multiple loans you may find that consolidating them is best, you can find out more about that here.
Compare lenders
Just like when trying to get the best deal on broadband or a mortgage you can also shop around for a loan. Compare a variety of loan companies and banks and work out which one is best for you, the first one that agrees to lend you the money may not be the one that offers you the best rate so shop around.
Going Forward
Once you have secured your loan and then paid it off it is important to understand how and why you were in the position that you were in the first place and how you can avoid it happening again in the future. For some this will be due to the fact that there was an unexpected change in circumstances that is unlikely to be repeated for others it might be due to low income, large out goings or a lack of good money management.
Whilst looking to the future it is important to start thinking about the following things
How to cut down on debt
How you can save money
Where you can reduce your spending
Being proactive will hopefully mean you will not be the same position again and will help you secure your families financial future.