Borrowing money is a tricky business that can seem scary when starting out. Most financial advisors may advise against taking a loan but then again, it can be your only option when hard pressed by immediate obligations. It gets even scarier when you’re unable or having problems making timely payments. We all need a financial boost from time to time, but it’s important to ensure that you understand the anatomy of borrowing money. Among other things, this means taking into account the overall amount it will cost you to repay the loan and how you’ll get the money to repay the loan. It can be frustrating when you’re behind payments, but it’s even more painstaking to acquire loans with a ruined credit history.
With that in mind, below some secrets to staying ahead of loans.
1. Borrow What You Need and Not What You Want
There is a huge difference between what you need and what you want. Most people will get carried away by things they can absolutely go without. Well, ask anyone and they’ll tell you that they want to drive a flashy car, live in an expensive mansion, and dine in the most exotic restaurants. Truth is, life in the fast lane can initially seem like a must-have. But it comes at a cost… a cost that can be painful in the long run. For instance, you can qualify for a $500,000 loan facility but can only afford to pay half this money. Surprisingly, you are allowed to borrow as much as you can qualify, so make it a point to stay within your budget when borrowing.
2. Do Not Be Afraid To Terminate Your Loan Contract
The minute you agree on the terms and conditions of the loan and sign on the dotted lines, you automatically enter into a legally binding agreement with the lender. Failure to adhere to the contract rules can result in legal consequences. Now, this is perhaps what prevents many borrowers from terminating a loan contract. A recently published guide from MoneyExpert on how to cancel your loans early provides you with a killer strategy of managing your loans.
In this helpful guide, you’ll learn that when done right, terminating the loan contract will not affect your credit score, meaning that you’ll still qualify for a loan if you need one in the future. But it’s imperative to follow the right channel by first ensuring that your loan was covered by the Consumer Credit Act, notifying your lender on your plans to cancel the contract beforehand and ensuring you pay back what you owe.
3. Consolidate Your Loans
If you have multiple smaller loans, credit cards, or hire purchase, chances are it’s overwhelming you. This is because smaller loans and credit cards attract higher fees as well as high-interest rates. In the long run, you could find yourself missing payments or making late payments. As confusing as it may seem, there is a way out. You can always simplify your life by paying off all these debts with a personal loan. This is what is referred to as loan consolidation, which allows you to focus on a single loan instead of smaller, unmanageable loans. It helps save you time and money while giving you the much-deserved peace of mind. Talk about bringing sanity into your finances!
4. If Possible, Make Extra Payments
Whenever possible, the extra money you make on the side say, for instance, a bonus from work, good profits from a side hustle, or any windfall should be put into good use. The best way is to use this money to make extra payments towards your loan. This will help reduce the amount you pay every month. It will also help to build trust with your lender, seeing that you’re interested in clearing the loan.
5. Choose a Repayment Schedule That Works For You
Before committing to a loan, it’s imperative to ensure that you can afford to pay it back. Now while this may not be a problem, the repayment option of your choice can coincide with your other obligations and ultimately force you to hold back some cash. The best strategy is to set up a repayment immediately after payday. This way, you’ll not be tempted to spend money irresponsibly. You should also communicate with your lender whenever you want to change the repayment dates. Many lenders out there allow for such flexibility these days.
It’s important to ensure that your finances are in order by making sure that you are ahead of your loans. This is critical not only to your growth and expansion, but also to your well being. By taking account of the above pointers, you’ll have what it takes to become a smart borrower.