The Do’s and Don’ts of Borrowing Money
Loans are a great convenience. They can help you buy things that you otherwise would not have been able to afford on your own. You can use loans for anything from buying a house or a car to paying down debt, handling a financial emergency, or taking a much-needed vacation. As convenient and beneficial as loans can be, if you fail to manage them properly, it could ruin your finances. Not only will it place a negative mark on your credit history, but it can make it can result in an uphill back to financial freedom. If you are thinking of applying for a loan of any kind, keep these do’s and don’ts in mind.
DO Apply with Reputable Lenders
Believe it or not, there are a lot of scams out there pertaining to loans, especially if you’re applying for a payday loan. When you start looking for the best lender to apply with, be sure to do your due diligence. This means checking in locations like the Better Business Bureau or online review sites to determine the validity and overall experience of doing business with a particular lender. Once you’ve learned where to find payday loan alternatives, check to see what others have to say about them and also to determine if they have the proper licensing to be a lender in your state.
DO Read The Loan Documents Entirely
It can be exciting to see that you’ve been approved for a loan. When you’re in a bind or need to get quick cash, it can be tempting to simply sign on the dotted line and move on without giving it a second thought. However, you never know what you’re signing. It is imperative that you read your loan documents entirely. You want to understand what your responsibilities are and what happens in the event you can’t uphold your end of the bargain. If you’re unsure of terms or rules of the loan contract, it is best to ask questions before signing or you could end up regretting it.
DO Make Timely Payments
Once you’ve agreed to the terms and regulations of a loan it is your responsibility to pay the balance plus interest back in full. It would behoove you to make these payments in a timely fashion. Late payments can lead to everything from a bounced check and insufficient fund fees from your bank to late fees and penalties from the lender.
DON’T Lie on Your Application
Though getting approved for certain loans can be difficult, lying is never the solution. You should never falsify information to increase your odds of approval. Whether you have poor credit or a small income, it is best to be open and honest about your finances. Lying can result in denial and the inability to apply again in the future.
DON’T Take Out More Than You Can Afford
No matter how strapped you are for cash, you should never apply for more funds that you can afford to repay. You can learn the true costs of a loan and compare it to your budget. Though it might be a relief to get a large sum of cash deposited into your account, when the time comes to repay it, you’ll find yourself in a world of trouble. You’ll end up falling behind on payments which will lead to more interest, fees, and a ruined credit history. Failure to repay certain loans may even result in lawsuits, wage garnishments, income tax withholdings, and the repossession of your personal assets.
DON’T Ignore Lenders
Has something come up financially that has prevented you from being able to make your payments on time? If so, the last thing you want to do is ignore the lenders when they try to reach out. This can lead them to believe you’re unwilling to repay as agreed and force them to take further collection action against you. Instead, speak with them and let them know what’s going on and try to figure out another solution.
Borrowing money isn’t an issue. Everyone does it. However, when you borrow money and you’re not responsible, this is where the problems start to develop. When taking out a loan of any kind it is imperative that you practice being a responsible borrower. By keeping these do’s and don’ts in mind you’ll establish a positive relationship with lenders that can help you to afford some of life’s biggest goals.