Many people borrow money to help tide them over in tough economic times and though doing so should not be seen with the fear and controversy that it often is; it should always be approached having been carefully planned and considered. By knowing how best to go about it, you can eliminate the risks associated with borrowing money and pay it off without spiraling into debt.
- Shop around: There are so many different lenders that offer loans and credit cards to consumers and it is important you find the one that is right for you. By taking the time to find the best interest rates and most reasonable monthly repayments, you immediately give yourself a better chance of remaining in control. Considering that you will likely spend months - if not years - paying off the loan, that extra bit of time weighing up your options is definitely worth it.
- Total costs: The amount you borrow will not be the amount you pay back; loans are never that simple. Interest rates and insurance can significantly boost your bill, especially if the money is being taken out over a long period of time and so you should always calculate exactly how much you will have to pay back before you agree to any deal; it is important you make sure you will be able to afford the repayments if you want to avoid falling into debt.
- Multiple loans: At the time is can often seem like a good idea to borrow money to help pay off existing debts but this is a costly trap that will more than likely worsen your initial problem. The same goes for credit cards; pay off one before you take out another and start building up additional debts on it.
- PPI: Payment Protection Insurance (PPI) is designed to ensure the continuation of repayments should you become unable to work. In many cases however, it is mis-sold, fails to provide adequate cover or provides cover that already comes from an existing policy. Always be sure you aren’t taking on more expenses than you need to.
- Know your loans: You would be wrong to think that a loan is a loan and it is as simple as that, as there are in-fact several different types available to consumers. The biggest difference you must know is that between a secured and an unsecured loan. With an unsecured loan, cash is the only thing involved in the borrowing process and the longer you fail to make repayments, the more money you will owe your lender. With a secured loan however, the money is taken out with your belongings acting as a type of insurance. This means that if you fail to repay the money on time, you could lose the likes of your car or even your home.
- Interest free: You may come across loans that are ‘interest free’ but be wary as these are often only interest free for a limited amount of time before the fee starts rocketing at an alarming rate. Always read the small print and if a deal seems too good to be true then chances are it is.
- Loan sharks: People often turn to loan sharks or pay-day loan companies when they need a smaller amount of money quickly to tide them over. These come with eye-wateringly high interest rates however and in almost all cases, simply make the situation far worse, increasing the pressure and driving people to even more drastic measures to pay off their debts.