Wednesday, February 01, 2017

Borrowing the Right Way: Tips and Warnings for Families

As a family person, you will know how hard it can be to run the household and balance the books at the same time. If you don’t manage to balance your books, you can get into debt trouble. And that can lead to more borrowing. Borrowing certainly isn’t always bad, but it does need to be approached and undertaken in the right way. If it’s not, you will find yourself in a bad situation later on. The tips, tricks and warnings you will find below should all help you to borrow in a way that is sustainable and manageable. So, what are you waiting for? Read on now. 

Always Shop Around for the Best Deal 

First of all, you need to make sure that you always shop around before you take out a loan. If you just opt for the first option you find, you will not make the right decision. This means that you are not considering the options and you won’t know which deal presents the best value for you. Different deals can be better for different people. If you need a short term length on your deal, prioritise this. Or maybe you want a longer term and a lower interest rate. Take your needs and equipment into consideration when comparing and contrasting all the loan options available out there. 

There is Such a Thing as Good Debt 

Debt is not something that has to be universally bad. There is good debt that you can take advantage of if you know how to. Good debt refers to any debt that was taken on in order to buy something that is likely to appreciate in value. For example, a mortgage is good debt because it gets you onto the property ladder, provides a long-term home for your family and the price is likely to rise. Of course, nothing is certain. You can’t be sure that the value of the home will go up. On the other hand, something like a loan that pays for a car purchase is not good debt because car values always go down.


Payday Loans Present Specific Challenges 

Payday loans have been talked about a lot over the last few years. This is because the use of them has increased massively, and they are controversial in many ways. The interest rates are very high, and they have to be paid back very quickly. If you are not able to meet your repayment deadlines, the interest in the loan can increase massively. This can make it impossible for you to ever pay the money back, and the lender might even send bailiffs over to repossess your property. These companies should follow lending regulations, so this offers you some security. Make sure you know your rights. 

Not Reading the Small Print Could Come Back to Bite You 

When you take out a loan, it’s vital to read all the small print that comes with the agreement. If you don’t do this, it will only be a matter of time before you slip up and cause problems for yourself. Many people think they understand the terms of their loan, but that doesn’t necessarily mean they do. Only once you’ve read all the small print can you be sure that you know the loan deal inside out. Failing to do this could come back to bite you later on when something goes wrong, and you didn’t know about the issue because you didn’t read the small print. 

Borrowing Isn’t the Only Options 

Borrowing money isn’t always the answer to your problems. For many people, borrowing becomes a habit. It’s like an automatic reflex. When they need a bit of extra money, they take out a loan. But there are so many other options out there that could turn out to be much better for you. Don’t assume that you have to borrow when you need money. Think about how you can save some money by cutting back on the things you spend on. The money you save can be used to pay for whatever you were going to take out a loan for. You could also have a clear out and make some cash that way. 

Always Check for Hidden Fees and Catches 

Unfortunately, there are lots of hidden fees and catches that you need to be aware of when you take out loans. You don’t want to end up paying back more than you thought you had to. Ask the bank manager you speak to whether there are extra fees that are added on. It’s always so much better to be up-front and honest about these kinds of things. If you ask the question straight, you should get a straight answer. If they try to complicate the answer and can’t tell you outright what the fees are, you should walk out and get a deal elsewhere. There is always other options out there. 

Keep an Up to Date Repayment Schedule to Stay on Top of Debts 

Repayments need to be met if you are going to have any chance of managing your money properly. When you miss a repayment, even if it’s just one, you can fall behind and cause all kinds of problems for yourself. That’s really not what you need, so try to create a good schedule that you can stick to. If you stick to the plan and keep up to date with every loan repayment that’s due, you will be able to ensure that you don’t get into a debt spiral that’s hard to get out of. Being organised really is one of the best things you can do when it comes to managing your money.


Secured Loans Could Cause You to Lose Your Assets 

Secured loans can often seem attractive to people because the interest rates are lower. But there is always a catch. The reason why the interest rates on these loans can be kept low is because of the fact that the loan is secured against an asset. This asset is usually the borrower’s home. So, if you become unable to meet repayments and pay back the money you borrowed, the lender is entitled to take possession of your home and use this to cover your debts. It’s a pretty terrible situation to get into, so beware of this massive risk. 

Always Keep Business Debt Separate from Personal Debt 

If you run a small business or you’re self-employed, you should make sure that you understand the importance of keeping your finances separate. There should be no blurred lines between your business debt and your personal debt. This is tricky if you're self-employed. But when you’re running a small business, it’s more straightforward. The business’s debt should be managed carefully. This is because when your business debt is the liability of you as an individual rather than the business, you can have your personal assets repossessed if you can’t make repayments. 

Cheap Credit is a Good Way to Cover Small Costs 

Cheap credit is something that is definitely worth taking advantage of. At the moment, credit is relatively cheap, so using credit cards to cover extra costs and small amounts can be the best route to take. It’s certainly more secure and a lot less risky than taking out a personal loan. There are far more risks attached to taking out a loan, so keep this in mind when weighing up your options. Credit unions can also be good options to consider if you want a cheaper and less risky way to get your hands on some extra money.


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