There are two basic things that you should consider and follow if you want to have a hassle free life even in debt. One is to stay in control of your debt and manage it proficiently, and the other is to review your credit on a regular basis. If you are diligent in these, you will be able to notice any harms or issues cropping up and take immediate remedial measures so that it is prevented from going haywire.
Credit is beneficial as it can help you to do several things. You can buy your dream home or car, pay for your favourite consumer durables and even meet the cost of your child’s education. However, getting into debt is much easier than getting out of the vicious circle of it.
Thanks to the modern liberal money lending process and policies, funding has become easy to access. You need minimal documents and time to avail a loan from a bank, a credit union, a peer to peer money lender or any other private money lending sources. All you need is a good credit score and a good intent to repay your loan.
When you visit reliable websites or some other sites you will know that loan comes with different fees, charges and interest and these entire elements combined can make borrowing very expensive, and things might go out of your control if you are not decisive, planned and alert. Loans can become unmanageable very quickly especially if you borrow money more than you can afford to repay.
Therefore, to stay in control of your credit and loans, you must know your income, your expenses and the amount of money that you will have every month in hand to pay off the monthly bills.
Work it out well
You must work out for yourself if you can afford to borrow money given your present financial condition.
- It is also required to know the pros and cons and the creditor’s requirements that you will have to deal with for years at a stretch if you take the loan.
- You must know how you are going to make the repayments and the sources so that you do not miss any payment to harm your credit score.
All these factors when well considered will enable you to have a proper debt management plan in place.
Ask relevant questions
Before you even visit an office of a money lender or to a bank make sure that you are ready to take the loan. It is your confidence and ability to repay the loan that will retain your financial health and maintain a high credit score.
- Reason – Ask yourself the reason for your borrowing the money. Often people borrow money for something that they want. However, economists and experts say that it is a wrong process to get involved in debt as it will lead to more debts. Ideally, it would be better if you borrow money for something that you need and not want.
- Can it be postponed? – Also, ask whether borrowing money is your best option as there are several other options to meet your needs without getting into a relationship with a money lender. You may postpone the purchase of the item you need and start saving so that you can buy it outright later. You can put it on lay-by and pay it off gradually.
- Income level – Consider your income and if you find that you fall into a low-income group, then you can opt and qualify for a low or no interest loan.
- Credit status – You must have checked your credit health before you or a bank or any other money lender. You must have a copy of your credit report that you may get for free to assess your capacity to borrow and repay a new loan just like the creditor will do after you apply for the loan.
- Repayment ability -Make sure that you can afford to make the repayments on time. Work out on your present expenditures to know how much money you really have in hand to make the repayments. Consider making a budget and plan will with your income and expenses curtailing those which you can do without currently.
- Flexible – Keep your options open and allow flexibility in your budget so that you can easily and effectively deal with the rise in the rate of interest that is sure to happen frequently. Also, keep all your options open for unexpected personal and family expenses or any financial emergencies.
- Be prepared – Make sure that you are mentally prepared to live on less till the time you pay off the debt. This will ensure that there will be no missed payments that will affect your credit score adversely. The best way to do so is to start living on less a couple of months before taking a loan to see your ability and affordability.
- Time – The most important thing is to know the right time to borrow. You must be sure that your income and family expenditure, mental stress and family relations will not be affected adversely with the changes a debt is sure to bring in your life. Find out your job security, the scope of income raise, your plans, your health and age that may affect your income ability in the future.
- Hope – If you find that there is nothing perspective in the near future it is prudent to drop the idea of borrowing and start saving instead. You can always borrow at any time when favourable conditions prevail in future.
- What are you doing ? – You must know what you are getting into. Knowing who or what you are dealing with enable you to stay alert and make necessary plans to avoid any unfortunate incidents that might affect your relationship with the creditor.
Lastly and probably most importantly, you must know how to differentiate the good money lenders from the cons to avoid loan scams and other legal obligations. Check for their licenses and reputation in the market. Compare the products, fees, interest rates and charges, terms and conditions, penalties and prepayment fees before you enter into a contract.
John Bell has been writing articles on Social Media, skilled business consultant and Financial advisor for the last few years. In this post, he has written about the benefits of Social Media Marketing, Business, Finance as well as the features related to the same.