Any financial expert will tell you that borrowing of money is a serious financial decision as any mistakes could you land you into financial problems. Any mistakes or laxity on your side could see you getting into a cycle of debt and we all know that getting out of a debt rut is not a walk in the park. While you might be between a rock and a hard place, it is always important to pause and do due diligence before borrowing money.
Irresponsible borrowing has serious ramifications on your future as it affects many aspects of your life such as your ability to get competitive insurance premium rates, ability to land a job, obtain a phone contract, and buy a home just to mention but few. In light of this, what are some of the considerations when borrowing money? What is it that you need to take into consideration before you take the first step in borrowing money?
Your ability to repay the loan
Most of the time, people are so desperate to get approved for a loan that they fail to factor the aspect of loan repayment ability. You see, while getting approved for a loan is an exciting thing and a happy moment, inability to repay the loan will be the cause your sadness and runaway stress. If your current financial position or monthly salary makes it impossible for you to repay the loan, it is advisable that you pause and think of an alternative. Applying for a loan that is a burden to you is catastrophic and poor financial decision making.
Reputation of the loan company
Of course, company reputation of a loan company is very important considering the fact that there are many scrupulous providers out there. You need to carry out due diligence to ascertain whether a given company is reputable or not. Doing business with a reputable company is the difference between getting competitive rates and being swindled. It is the difference between top notch services and poor services. You need to carry out proper background research to ensure that the same loan company you are dealing with is reputable and above board.
Purpose of money you are borrowing
The rule of thumb is that you should always borrow money for something you need and which makes financial sense. The fact that same day loans attract high interest rates means that borrowing for the sake of borrowing could actually get you into a debt rut. Don’t over borrow. Borrow the exact money you need and don’t get into the temptation to over borrow simply because your lender is willing to give you that money. Exercise financial discipline and you won’t get into a cycle of debt.
Terms and conditions
It’s a no brainer that many people rarely read the terms and conditions of a loan before signing on the dotted line. Well, this, in simple terms, is catastrophic. Unscrupulous lenders always hide surreal charges in the terms and conditions. Ensure that you read the terms and conditions and if there is something unclear, seek for clarification before signing it!