Yes, we all need money that is above our income at one point in life. Whether it be to kick start your business, buy a car or a house. At times even your savings aren’t enough to make that purchase. So, alternatively we turn to loans as it is the quickest way to get hold of a lump sum of money. However it is for this same reason that people take out loans for things that they can do without. The fact that the money is easily accessible makes people ignorant of the long term implications it might have on their finance and their ability to pay it back. Have a look at the list below to see questions that you may need to ask yourself before you take this big step.
1. General Loan: Ask Yourself
• Do I really need to make this purchase now?
• Rather than paying interest to get what I want now, should I postpone the purchase and save the money to buy it outright?
• Can I purchase something less expensive and still meet my basic needs?
• Can I truly afford the payments?
• How fast can I pay it off?
2. Mortgage Loan: Ask Yourself
• This is a big purchase, is my job secure?
• How is my credit? Do I need to do any clean-up?
• Do I plan on living in the home for many years or only a couple?
• Should I get a fixed rate loan, adjustable rate loan or combination of both?
• Do I have money for closing costs?
3. Student Loan: Ask Yourself
• A poor credit rating can adversely affect my student loan application. What can I do to improve my credit?
• Am I going to make enough money at the job I hope to have in order to make the loan payments once I graduate? What is the starting salary?
• I don’t want the interest to accrue while I’m in school. Is my student loan subsidised?
• Can I get a part-time job or second job to help pay expenses?
4. Payday Loan: Ask Yourself
• Payday loans can get expensive because if they’re not paid back relatively quickly, fees can add up. Do I really need the money?
• Is there a less expensive way to borrow the money? A friend or family member if it’s just for a short period of time?
• Do I understand the terms: the fees, interest rate and repayment period?
• Can I repay the loan in this short amount of time?
• Is this becoming a habit?
5. Personal Loan: Ask Yourself
• Do I really need the money?
• Is there a less expensive way to borrow the money?
• Am I getting the best rate and terms?
• Is there a prepayment penalty?
• Is there a monthly fee?