Taking out a loan is nothing out of the ordinary for most people. It is usually a must when buying a car or a house but can also be quite practical on other occasions. What we should not do is to see it as an easy way to get money, as it involves costs and interest that can be a problem if the economic situation is difficult.
What should we compare before taking out a loan?
The advantages and disadvantages of each type of loan can be seen in a clear and concise way on Matchbanker. It is a safe and efficient loan comparison site, which allows us to resolve all our questions in an instant without wasting time looking up all this information for each financial institution. It is an entirely free tool and not binding for the user. These are the main conditions we should look at before making a decision.
– The amount of money offered by the financial institution. Does it match our needs?
– The time we have to repay the loan. It is important to be realistic, as penalties for late repayments are usually very costly, and if we cannot pay the loan back on time we may end up in a register of defaulters. That can make it difficult for us to apply for other loans in the future.
– All the expenses each loan comes with. It is not only about interest, we also have to remember commissions and fees.
– The requirements for the loan to be granted. If we are registered as defaulters for one reason or another, we still have the possibility of getting a loan if we look for financial institutions that accept ASNEF.
– The payment time. How long will they need to process our application and deposit the money in our account after it is approved?
Best tips before borrowing money
A loan is an option to solve a problem or get something we need. It is a simple and quick way to get money, but it is important not to ignore the fine print and the risks it may involve.
1) First things first; do we really need the money, or can we wait to save up on our own? A car, a computer or another work tool, an expensive visit to the dentist, an investment or a dream we want to fulfill can be valid reasons to take out a loan. What we should never do is ask for a loan to pay for some whim such as going shopping or partying with friends. Borrowing money to pay another loan is not a good idea either.
2) It is best to draw up a budget for our finances, to ensure that we can afford the monthly installments without struggling to make ends meet. We must be realistic and honest without being overly optimistic, because penalties for late repayments are usually very high. We could even end up in a register of defaulters if we cannot pay back the full amount within the given timeframe.
3) Using a loan comparison tool is the best way to get all the information we need with just one click. It shows us impartially what is good and bad about each financial institution and the different types of loans.
Will taking a loan keep us financially healthy?
In the same way we take care of our bodies and minds, ensuring that we are physically fit and have emotional wellbeing, we can also make sure that we are in good financial health.
Just as there are many items that contribute to our health in other areas, there are various factors that make up our financial standing. There are a number of indicators we can look at to determine our own level of financial health.
1) We are clear about our goals. Do we know in which direction we are going? Once we are aware of where we are headed, it is much easier to know where we are going, and whether taking a loan is the next step to take. We can evaluate the importance of our goals, and quantify the time they will take and the value they are worth. Clarifying and prioritizing our financial goals provides a solid foundation for financial fitness.
2) We have a good awareness of our cash flow. How much money is coming and going from our account? What are our major areas of spending? Developing a three-month overview of our finances can show us our financial habits. In turn, justifying our living expenses with our budget paves the way to knowing whether taking out a loan will best help us to achieve our financial goals.
3) Our debts are manageable. Regularly making complete payments in good time keeps our financial standing in top shape. It is ideal for us to learn to be happy living within our means. If we have not taken care of excessive spending or have many strong desires for luxuries outside of our budget, a loan may not be the right solution. How much money we already owe is an important factor in determining our financial wellness, and whether we are willing to take out a loan that will add to our debt.
4) We have kept aside emergency funds. When we have ample reserve cash, life’s unexpected happenings will not need to make us stretch too far beyond our means. Saving for that rainy day is a wise measure that protects our financial health. Having money kept aside is a sign of financial wellness, and can also be a source of funds for future loan payback.
Once we have a clear picture of the level of our financial fitness, the choice of whether or not we should take out a loan will be a much easier decision. When we are assessing our options for borrowing money while at the same time seeking to maintain optimal financial health.