Today, people are borrowing money all the time – for new cars, homes, house renovations, university, and even for starting their own business. The option to borrow extra money may be an attractive one for many, and it’s great when you’re in need of quick loans for an extra infusion of cash, but it’s good to be aware that borrowing does not come without its risks and dangers.
Borrowing too much money, for example, can leave you in a sticky financial situation where you’re unable to pay household bills or buy essentials, whilst being unable to keep up with repayments can seriously damage your credit rating and affect your financial choices in the future.
So, if you are thinking about borrowing money, there are some very important considerations to take into account before you finally make a decision.
#1. Your Credit Rating
Before you look at quick loans, a credit card, or any other kind of financial product, it’s good to know exactly where you stand in terms of your credit rating. Your credit rating is what lenders go by when they decide whether or not you’re worth accepting for a financial product, so it’s not just good to know in terms of understanding where you’re more likely to be successful when applying but also so you can determine if it’s worth risking doing any more damage to it.
The good news is that there are many free options for checking your credit rating online and you can see exactly where it has been influenced to go either up or down. Since borrowing money always comes with some risk of credit damage, having all the information on your credit rating before you begin will help you to keep it high.
#2. Your Budget
You might think that the idea of taking out a loan such as quick loans before you’re sure that you can pay it back is ridiculous, and it is, but you may be surprised at the number of people who do this. If you’re desperate for money, it can be all too easy to accept the offer of quick loans or a credit card without giving much thought as to how you’re going to be able to afford to pay it back later. Remember that borrowed money must always be paid back! It may be worthwhile trying quick loan alternatives which are more suitable for those who want to avoid non-transparent lenders.
So, before you accept the offer of a loan, credit card or other financial product, it’s important to be fully aware of the repayment structure and work out how you’re going to fit this into your budget. Be sure to include all your priority bills, such as rent, council tax, and utility bills beforehand to determine how much you’ll have left for repaying debts. If it looks like you might struggle, then consider other options, such as borrowing a smaller amount or using a credit card with an interest-free period.
#3. Your Future Plans
Before you borrow any money with quick loans, hire purchase agreements, car finance, credit cards, a mortgage, or even money borrowed from friends or relatives, it’s important to carefully consider your future plans and how they will fit around the repayment structure. Once you’ve worked out your budget, it’s important to determine how long you’ll be expecting to pay the debt back – bear in mind that the more you can pay each month, the quicker you’re debt free again, so it might be worth tightening your purse strings for a while and paying more monthly to get it done faster.
If you have any big future plans lined up such as a holiday, wedding, or a big purchase, then make sure that you incorporate these into your plans – will repaying the money that you’re borrowing now affect them? If so, are there any alternative options for you to consider, to minimise the impact?
#4. Your Circumstances
Finally, it’s vital to take your circumstances, both now and in the future, into account before borrowing any money. Ask yourself questions about things such as job stability, living arrangements, and other changes that could happen in your life, such as having a new baby, for example. Whilst your circumstances now might be great with regards to being able to repay borrowed money, bear in mind that there’s always the risk that this might change in the future, and it may not always be for the better! It’s good to make sure that you are prepared for any big financial changes that could be possible, such as losing your job or earning a lower income, paying off unexpected expenses, having to move to a new home with a higher rental payment, or even welcoming a new family member.
Borrowing money can be easily done, but it’s not always easy to repay it if you haven’t fully thought it through. Taking the time to go over these vital considerations is essential.