When you borrow money, it is really important that you are responsible with the loan that you take out. You don’t want to take a bad loan that costs you a fortune and that ends up being difficult to pay back because of fees and other costs. You also don’t want to take a loan from a lender that you cannot trust or that uses dishonest and illegal collection tactics. Finally, you need to ensure that you can pay the loan back on time and in-full so you do not do damage to your credit or end up with judgments against you or other collections efforts.
To make sure you are making smart financial choices when you are borrowing money, there are some tips you should follow when it comes to taking a loan.
Tips to Handle Your Loan the Right Way
When you are first taking a loan, you should do your research to make sure that the transaction is one you should enter into. Here are some tips for finding a loan that makes sense for you to take on:
- Get the loan from a reputable lender. Instaloan.com provides you with the opportunity to get a loan from a lender that you can trust. Understand exactly who you are borrowing from and check the lender’s reputation and the length of time they have been in business before you make the choice to borrow money.
- Know what your interest rate is. The interest rate is the amount of money that you pay in exchange for being able to borrow. Interest is usually represented as a percentage of what you borrow even if some loans charge you a flat fee rather than on a percentage basis. If you don’t have very good credit, if you have no credit or if you need the money fast, you can expect to pay a higher interest rate for the loan.
- Know what your payback period is. You want to ensure you know exactly how long of a period of time you have in which to pay back the debt that you took on. This way, you won’t be surprised at how long you are obligated to continue making payments on the debt.
- Make sure your monthly payment is affordable. Before taking the loan, find out how much you have to pay on the loan and when it will be due. If the loan is not affordable and you can’t make the payments, pass it up and explore cheaper options or avoid borrowing money altogether.
- Know whether the loan is a secured debt or an unsecured debt. If you borrow money on a secured loan, you need to pay it back or else you could lose the collateral (money or asset) that is acting as the security guarantee on the loan.
After you have borrowed the money, you also need to make sure that you continue making smart choices about the debts that you have taken on. Some tips for handling an existing loan the right way include the following:
- Be sure to pay back the loan on time every month as required. As Credit Karma points out, missed payments can have a serious adverse impact on your credit score. Even paying late will drag your score down and will result in you having a lower credit rating.
- Talk to your lender right away if you suspect that you are going to have trouble paying. For some types of loans, it may be possible to enter into a payment plan or to put the loan in deferment for a period of time if you run into short-term financial trouble. You may also be able to refinance or extend the terms of the loan so you have a longer period in which to repay the debt. Of course, this will make the loan more expensive and will mean that you are in debt for a longer period of time so you should do this only if you don’t have any other choices. You should always try to prioritize your budget to make sure that you are making your loan payments.
By following these tips, hopefully you will be able to successfully manage borrowing money so you can meet your short-term financial needs without adversely affecting your long-term financial fitness. Taking the time to do the research before you enter into any type of loan transaction is just a smart choice and the research will pay off by allowing you to make better borrowing decisions.
Gail Thompson has years of experience managing finances. If she advises it, well, you can bet it’s worth doing!