There are many different ways to borrow money. You can borrow money to buy a house, take out a personal loan to buy a car, get a store card, buy a fridge on higher purchase or pay for your holiday using a credit card. These are examples of ways in which people borrow money.
There are many reasons why people borrow money. First, if you need some cash urgently, you can get it right away instead of saving for months or even years in order to raise enough money to buy what you want. Second, if you’re buying a very big item, you can spread the payments over a longer period and thus make smaller monthly payments. For some people, this would make purchasing big ticket items affordable. Lastly, it’s convenient. You can do it anywhere, on the internet, over the phone or at your local branch. You can use the internet to compare different deals and offers before you buy.
Here are some of the things you need to consider before you borrow money:
1. Can You Afford The Repayments?
One of the reasons debts get out of control for most people is that they do not do a proper assessment of their income before they borrow money. They just act on impulse and buy whatever it is that they want without considering their situation or income position carefully. Look carefully at you earnings and expenses and decide if borrowing money is right for you. Check your budget so that you know what you really can afford to repay. Can you really afford to pay for the item in the long run? Do you really need the item that you want to buy with the money you’re borrowing?
2. Are You Getting The Best Deal?
Shopping around is one of the best ways to get the cheapest deal on any product or service that you wanted to buy. The internet now makes it even easier to shop around. There are specialist search engines for many types of products. Many shopping bots even allow you to compare personal loans, mortgages, credit cards and insurance products online. You can use the APR rate quoted to compare different offers and deals.
3. Do you understand what you’re getting into?
Have you worked out the true (real) cost of buying the item or service on credit? In many cases, you pay more for buying on credit than if you pay cash. If there is an interest free period, remember that if you do not settle the loan before the end of the period, your lender will start charging you interest. If your circumstances change and you can no longer afford to pay cash or settle the loan after the interest free period, the loan can turn out to be very expensive. Always read the small print and check what the APR rate is. If there is something you don’t understand do not be afraid to ask.
Consumer credit is available as a credit or finance agreement using a credit card or a personal loan. If you use your home as security for a loan, your home may be repossessed if you do not keep up with the repayments.
Remember there are various ways to pay for products and services. If you plan carefully, you can borrow money interest free by taking advantage of 0% interest offers and settling all your debts on time.