If you manage to get through life without ever needing to borrow money, consider yourself lucky! The truth is, in the past year, 34% of Americans have taken out personal loans. That’s not including mortgages or auto loans! Unfortunately, borrowing money is an evil necessity, but you can be smart about it. Here are a few tips to help you borrow responsibly.
- First, and probably most important, what is your reason for borrowing? This is a big decision. You want to make sure that you after borrowing you end up right side up in your loan, meaning the asset you are borrowing for appreciates in value. Good examples of that are homes and education.
- Figure out how much you can afford. This is important. You want to figure out how much you can COMFORTABLY afford to pay back. If you can’t afford to pay the loan back, you shouldn’t take it out.
- Set a budget. This one is pretty straight forward. Work out a budget and stick to it. Factor the estimated loan payment into the budget and make sure you can afford it.
- Don’t settle. The first deal you get isn’t always the best. Shop around and do your research. You may just find a better interest rate.
- Get a separate bank account. This is a good idea to help keep your loan payments separate. This way you don’t run the risk of spending it. You can even go as far and dividing the payment up between paychecks and have that amount direct deposited from your check to the account. Out of sight, out of mind!
At the end of the day, borrowing money is sometimes unavoidable. When the need comes up, and it probably will, just make sure to keep your current financial situation in mind. Don’t put yourself in a position where you end up living pay check to pay check. Do your research and borrow smart!