Borrowing money isn’t as nefarious a thing as people seem to think. In fact, it can even be beneficial — if done right. When borrowing money, it’s important to keep a few things in mind in order to ensure that you’re not digging yourself into a hole. Below are a few tips and tricks to help you manage your loan effectively.
1. Say “no” to variable rate loans
If you’re already in a precarious financial situation, it’s best to avoid variable rate loans at all costs. Although there might be some upfront benefits to them (like low interest rates at the start of the loan period), they’re too unpredictable and risky. It’s always best to know exactly what you’re getting yourself into, so that you’re able to budget accordingly.
2. Don’t worsen your debt with more debt
It goes without saying that borrowing more than you can afford to pay is unwise. Similarly, borrowing money in order to pay off another debt will only serve to lighten your worries temporarily. But don’t fall into this trap — it will only worsen your situation in the long run. If your debt-to-income ratio is anything over 50%, it’s high time you reconsider your options. Either revise your budget or book an appointment with a Licensed Insolvency Trustee.
3. Pay off more than just the minimum payments each month
This may seem like an obvious tip, but you’d be surprised by how many people neglect to do this. Although only paying the minimum payments isn’t going to negatively affect your credit score, putting a little extra cash towards your loan will mean that you’ll be paying less interest down the line. This doesn’t mean that you should double the minimum payment on your loan per month, but it would be beneficial to put whatever extra cash you have left over from your budget towards your debt.
4. Always read the fine print and negotiate
It may seem like you’re getting a really good deal, but you’d be surprised by the number of times people get themselves into trouble only because they didn’t read the fine print of their agreement. Always ask questions, and if you don’t fully understand the agreement, contact a professional. It would also be extremely beneficial to negotiate your terms by asking for a lower interest rate so that you’ll pay less in the long run.
5. Only aim to use 35% or less of your total available credit
This is a tip that not many people are even aware of. After all, if you’re offered a certain amount of credit, why shouldn’t you be able to use most, if not all of it? Little do people know that using over 35% of your total available credit can have a negative impact on your credit score because it tells loaners that you’re in a precarious financial situation. So if you’re trying to improve your credit score, think again before adding another purchase to your credit card!
6. Don’t hesitate to ask for assistance
Borrowing money, if done correctly, can have some benefits. It can help you build up your credit score, or even increase your net worth. But if done incorrectly, it can have serious effects on your financial health as well as your mental health. That’s why if you feel like you’re stuck in a situation in which you can only handle your current debt with more debt, ask for help as soon as you can.
By contacting a Licensed Insolvency Trustee (LIT), you can be sure that you will find the relief you need. An LIT will assess your finances and come up with the best solution for your personal situation.
The sooner you get help, the faster you will be able to get a fresh start without the burden of debts weighing on you.