In today’s challenging financial environment, if you wish to borrow money, it is certainly not easy to find an agency to lend it to you, and things will only become harder if you fall behind in your payments. Here are some useful tips to be used as a guide on borrowing to keep you from falling behind on your debts.
- Prior to getting a loan it is very important that you develop a plan for repayment with a reputable credit agency. This will help you to stay on track.
- A good guide on borrowing as any other to stick to is to stay within your budget by borrowing only what you need rather than what you are approved for borrowing which is usually higher. Lending agencies tend to encourage you to borrow the maximum you qualify for, which might be way beyond your budget which is likely make you end up in debt.
- To further guide you in your borrowing, we recommend that you use your bank’s automated payment service as a regular schedule for your debt payments and so reduce your rate of interest. This facility allows you to send payments on a set date each month and so eliminates the possibility of being late or forgetting and incurring additional charges.
Consolidate Your Debts
Another useful strategy and guide on borrowing is to cut your interest rate by consolidating your debts. An immediate advantage is that it lowers your interest rate. This is particularly helpful with credit cards which attract high interest. Another is that you only have to make one payment per month which will certainly make your debts more manageable.
Consolidating your loans will also help to prevent you from falling behind by reducing the chances of forgetting to pay since you only need to make one instead of several payments.
Prioritize Your Debts
If you choose not to consolidate your loans then you might want to follow another guideline for good borrowing which is to prioritize your debts to stay ahead of the game.
- Make a list of all your loans and review all the terms and conditions and the different rates and fees for each.
- Rank your debts from the highest to the lowest interest rate and try to pay off the highest ones first, and for credit cards, try to at least make the minimum monthly payment.
- Identify special offers of reduced interest for a limited time or for early payment and take advantage of these, whenever possible.
- Similarly, note the extra penalties for late or non-payment, and make sure you avoid both. Making this a priority will cost you less and the money saved can be used to keep up with your payment on other loans.
Practice Paying Forward
This means trying to reduce your debt by making extra payments whenever you can. This is another good guide to borrowing and a smart move if you practice doing this whenever you find yourself with some extra cash and so reduce the overall amount you are required to pay in the long run. Use some of these unexpected funds to reduce your debt and it is always better to make the payment go toward one debt, rather than trying to spread it across several. –
Paying on a Bi-weekly Schedule
Another helpful guide on borrowing is paying your debt every two weeks instead of once a month. This is a good way to reduce the length of time it takes to repay a loan and thus you’ll be saving on the total interest you have to pay. This is especially beneficial if your loan is long term like a mortgage. How? Because when you pay monthly you end up making only 12 payments for the year but when you pay bi-weekly you actually pay for 13 months each year, thereby making an extra month’s payment. This translates into a shorter time for repaying your loan and will lead to a reduction of the interest, plus you will always be ahead in your payments.
Consider Re-financing Your Loan
As a further guide on borrowing, it might be to your advantage to consider re-financing your loan, especially if at the time when you original borrowed the money your past credit rating was not very good. Now that your credit rating has improved, this would be a good time to see if re-financing is for you as it could lead to a much lower rate of interest and at the same time provide you with access to equity in any item of value you might possess.
Remember, it is very important that you learn how to manage your debt and one way of doing this is learning how to stay ahead with your loan. Hopefully, you will find this guide on borrowing useful in helping you to do just that.