Borrowing money seems like an easy way to get cash quickly, but it comes with the greater responsibility of paying it back in a timely manner and fitting it into your budget.
If you’re looking for a loan, there are a few steps to take to ensure that borrowing money is done safely and wisely, otherwise you could fall for what’s known as predatory lending. Poor terms, fees, and interest rates aren’t the only catch, however – you also have to be ready to pay it back when the time comes.
Here are five things to keep in mind when thinking about getting a loan.
- Be aware of who you’re wanting to borrow the money from. Many places offer low interest rates on loans, but have tight parameters that are written in fine print, making it difficult to ever be completely free of the loan.
- Understand the interest rates on loans and how it fits into your budget, such as what the monthly payments will be. Compare your options to get a better understanding of what’s out there.
- Write out a pros and cons list for why you’re getting the loan. Is it for something necessary or for entertainment? A new car you don’t really need or floors to replace ones that were just flooded? Knowing why you’re getting it can help you borrow a lower amount, making it easier to pay back. It can also help put your priorities in check and evaluate if you really want to commit to this loan.
- Don’t get a loan for more than what you can feasibly pay back. Just because you qualify for “X” amount of money, doesn’t mean you need it all – take only what you need so you know you will be able to pay it back on time.
- Create a payment plan and an outline of when the payments for the loan will be made and integrate it into your budget so you know how it will impact your finances. In addition to creating this plan, you’ll see the long-term effect it’ll have on your finances, which can help you decide if it is worth it.
The most important thing to remember about borrowing money is to not bite off more than you can chew. Make sure that your loan amount is reasonable and the borrowed money can be paid back without added financial stress.