While borrowing money is ill-advised in many situations, there are times when it is the only option. Buying food for the family or paying off high-interest credit cards can force you into borrowing money from banks, credit unions, and relatives. Nonetheless, you shouldn't blindly borrow cash. Avoid panicking and signing up for unfair rates and repayment conditions by following these five simple safeguards. Doing so will prevent you from further damaging your finances and speed up your ability to pay the loan.
Decide How Much You Need
It's easy to get lured into signing off on a much greater loan amount than what you originally went in for. Keep in mind that loans are financial products and thus it's in the lender's best interest to sell you as much of it as he/she can. As a responsible and smart borrower, your first safeguard should be to predetermine how much you need before shopping for loans and stick to that amount. If your hospital bills cost $300, take out $300 and not a penny more. Of course, this also requires you to know beforehand how much exactly your expenses are including taxes or delivery surcharges that may be incurred.
Read the Fine Print
Most borrowers and consumers, in general, are lazy when it comes to reading the fine print of the products and services they buy and sign up for. As a result, they get slapped with monthly fees and unscrupulous terms that make it more difficult to repay the initial loan amount. Avoid finalizing paperwork and putting your signatures without reading and fully understanding the contract. For instance, if you're applying for a car loan, make sure you understand how online car title loans work and what responsibilities come with it.
Go With a Reputed Lender
Another crucial safeguard to implement when borrowing money is vetting the lender. Whether it be traditional or non-traditional lenders, it makes practical sense to sit down and research your prospects beforehand. Thanks to the web, it's much easier to compare lenders based on reliable, third-party reviews. User testimonials and forum activity are also great ways to gauge the security of any particular lender. Traditional lenders, like banks and credit unions, are generally safer bets for borrowers, but relatively nascent players in the field, such as payday loans and peer-to-peer lending, are also becoming trusted.
Don't Focus Solely on Interest Rate
The interest rate on your loan is equivocally important as it determines the overall costs of borrowing the money. However, it shouldn't be the sole factor that you base your final decision on. There are other equally important factors that you should figure out beforehand, such as what repayment term the lender is willing to offer, what cost percentage of your collateral, if any, your lender is willing to finance, and what other guarantees are being asked on your part if the loan defaults. According to loan experts, there are qualitative data in a loan contract that you have to think of meticulously lest incur financially devastating consequences.
Borrowing money doesn't necessarily need to carry negative connotations. As long as you dedicate the time and effort to vet your options and learn the industry jargon, you can leverage the power of loans to better your personal finances.