In the latest in our series of articles looking at the process and decision making involved in taking out a short term or flexible loan, we took a look at how to borrow the right amount. Because it is crucial that you get this decision right before proceeding with any credit agreement.
The first step you must take is to be definite in the need to borrow money at all. Not everyone who takes out a loan is doing so for the right reasons. Not everyone is making a sensible call by taking out another credit agreement. So before you sign on the dotted line, be sure that you need the money, it is your best option and that it will be spent on a necessity in life. You should never borrow money for a treat, or even for a holiday. The latter can be excused if you know you will have greater funds in the long run to cover the cost. But generally, that is not what loans are designed for.
And linked to the above, even if your need for credit is absolutely necessary, you should never treat it as free money. It is not something to worry about repaying at a later date. You should be disciplined, and this means borrowing the absolute minimum amount you need for essential purposes. What many do is add a bit on extra. They think that as they are borrowing money, they may as well take a bit more and treat themselves. We cannot state this enough. It is a terrible idea. You will simply make your debt problems worse and your repayments more challenging.
As always, and we have stated this in many articles on this site, do consider other options before taking out a loan. Whilst our business is providing loans to those that require them, we do not push financial products on people. We insist they explore all options. And we do not look to say yes to everyone, only those for whom a loan is a sensible idea. So do consider if you can borrow off friends or family, or make savings in your monthly budget to remove the need for extra credit.
Do not just borrow money then worry about it later. You must think about the entire process and be comfortable with what lies ahead. There is no point borrowing money if you do not have the funds to pay back what you borrow. you should not even consider taking out a loan if this is the case. This simply puts you further into financial difficulties and could see you trap yourself in a debt spiral. So do the maths, work out the figures and find a repayment plan that suits you. One that fits in with your earnings and existing outgoings.
A final option is to reduce what you need to borrow by raising some of the funds elsewhere. This could be by something as simple as selling off unwanted items on eBay. Or cancelling the odd subscription or two. Going without the odd meal out – you get the general idea. If you can lower what you need to borrow, then this will make repayments much easier.