At some point, nearly all of us have to borrow more money. Sometimes people don’t know how to borrow more money. It could be a short term loan to deal with an emergency between pay days. For others, borrowing for a major purchase – such as a car or house – may be the only loans they ever take out. Regardless of the amount or duration, it’s important to borrow money wisely. Here are five things to consider when you need to know how to borrow more money wisely.
How to Borrow More Money Wisely
It can be tough to know how to borrow more money wisely but it is possible. Sometimes you may get stuck on how others may feel about you asking but you never know until you try. Here are a few things you can do to help make smart decisions when borrowing.
1. Shop around for the best terms.
Not all lenders offer the same interest rates or terms. Some may offer a decent interest rate but their terms are not good and can even result in stiff penalties for late payments.
While traditional banks are where most people go to borrow money, an increasing number of folks are turning to credit unions as an alternative.
Many borrowers prefer credit union loans because:
- their rates are often lower
- their terms are friendlier
Many credit unions offer signature loans with much lower rates than banks and other lending institutions. Credit unions are often worth the consideration.
2. Only borrow what you can afford to pay back.
This should be self-explanatory but anyone can be swayed into terms they do not understand. Sometimes, people fall into a trap where the lender will offer them a higher loan amount than they had planned on borrowing. Some people think this can be a good thing and can really “help” their situation. However, this is not the case.
Borrowing more money than you can pay back can result in struggling to pay back the loan. They may tack late fees and other charges onto your loan as well.
Borrow the amount you need and only if you can afford to pay it back.
3. Review your credit report before you apply for a loan.
Your credit score is a primary factor used to determine the interest rate when you borrow money. One out of five credit reports contains incorrect information which makes the borrower seem riskier than they really are. If you find an error that adversely affects your score, you should attempt to correct it.
Doing this may raise your credit score to a level where you will be offered a much better interest rate.
You are entitled to a free credit report from:
You can do this once each year. Take advantage of this and review your credit report often.
4. Educate yourself on how loans and finances work.
It is possible to save money by understanding more details about loans and how lenders make money. The limit of financial education for many people is to understand what an interest rate is. You also need to know how that affects how long they have to pay off a loan. This can really help you when you need to know how to borrow more money.
For example, understanding how loans are amortized can help you make a plan to pay off a loan as soon as possible.
Being able to understand why making extra payments will:
- shorten the life of the loan
- reduce the interest paid
This, in turn, will help save you money.
5. Start saving before you need to borrow money.
Having a savings account may help reduce the amount of money you need to borrow. It may even eliminate the need for a loan. Most people who have a 401K retirement savings plan have the ability to take out loans that can be used for any reason. No questions asked. There are restrictions on how much you can borrow but the payments all return to your savings.
How to Borrow More Money Wisely: Do So With Caution
The key to borrowing wisely is to educate yourself on the benefits of sound financial planning. Keep tabs on your credit report and research all prospective lenders. When you need to borrow more money and don’t know how you will, these are five tips to consider.
Financial peace of mind is achieved when you make smart informed decisions and only borrow what you will be able to pay back.
Are you ready to start making smarter financial decisions? Is there really a need for you to borrow more money?
AUTHOR LaTia Longuemire
My name is LaTia Longuemire. I enjoy writing, singing, and cooking in my spare time. My passion is helping others. At this stage in my lifetime, I'm primarily focused on my children. They are everything that keeps my world spinning.