How to Borrow Money Wisely

Borrowing money is like many of the situations we face in life: just because we can does not necessarily mean that we should.

Difficulty: Challenging

Instructions

Things You'll Need:

• Discernment
• Judgment
• Legitimate need

1. Decide if you truly need to borrow: Need and want are two different things, although they can seem to be one and the same. Take care not to confuse the two and consider carefully the decision to borrow.

2. Determine if you can get along satisfactorily without borrowing. This one is tricky because our society is set up with the expectation of people borrowing. Car payments, house payments and other forms of lending are the life blood of our financial system. Borrow when you need to and sometimes when you WANT to, just be certain not to over extend yourself.

3. When you seek a loan, pay close attention to the terms of the deal presented to you. Lending ranges from a friend loaning you a few coins for the coke machine to a long term, high sum amount for the purchase of a home. Borrow a little less than what you are approved for and investigate thoroughly the lending institution you wish to do business with.

4. Consider carefully interest rates and repayment. Consult a financial adviser if you feel you need advice.

5. After taking out a loan, watch yourself and your finances closely. Resist the temptation to take out multiple loans for items you can live without.

6. Finally consider your credit rating. Repayment of loans on time and avoiding a history of past due payments will enhance your credit rating. Protect your credit rating as you do your reputation.

Tips & Warnings

• From Step 3: It is not necessary to be a financial expert when borrowing money, but you should know the basics before speaking with a loan officer. If you display knowledge, the officer will respect you and your chances of obtaining his/her best deal are increased.
• From Step 4: Those of you who have read my other articles know that I preach over and over again the importance of establishing and maintaining a long term relationship with a financial adviser or brokerage that you feel comfortable with and trust. It is the best thing you can do for yourself financially.
• From Step 6: Be wise in your use of credit cards. Credit is another form of lending and poor judgment can get you into much trouble. Resist the temptation to open multiple charge accounts. One or two major credit cards are more than sufficient for your needs.
• From Step 2: Be careful! Just because you are encouraged to borrow does not mean a financial institution will take it easy on you if you cannot repay.
• Don’t be afraid to seek a loan if there is need, but we should all be aware of the irresponsible behavior which has ravished the financial markets in the last few years.
• Unless it is a dire and unusual situation, stay away from a Payday loan. The terms are heavily slanted toward the lender.
• From Step 6: Be very careful when using credit cards. Interest rates are ridiculously high and it is very easy to use a charge card as a small loan. Prudence and good judgment are needed here more than at the loan office, for with plastic credit you have no chance of benefiting from a financial professional’s best advice.

[MyJB]

on 10/17/2009 Good advice on loans, borrowing, and repayment. 5* and a recommend.