Borrowing money can be a useful solution when making purchases. There are many ways to do it, ranging from large loans such as mortgages when buying a property to paying for weekly shopping on a credit card. However, money borrowed has to be repaid, so it is sensible to proceed carefully.
Shop Around
Don’t take out a loan agreement at the first place you come across. Look around at the different options to make sure you get the best deal. You can look at comparison sites like MoneySupermarket to compare different lenders. If you are considering a mortgage, a mortgage broker can help you find the best arrangement for your circumstances.
Check The Terms
Make sure that you fully understand the terms of the loan. The language in these agreements can be tricky to understand. It helps to know the difference between secured or unsecured loans, to recognise that payment holidays can increase the interest rate, or to work out how your payment will change on a variable mortgage if rates go up by 1.5%.
It may be a good idea to take legal advice before signing a loan agreement. If so, choose a legal specialist with experience in this aspect of the law, such as Parachute Law.
Take Your Time
Never borrow money on the spur of the moment. It can be tempting when making a big purchase if you are offered a finance arrangement, but this may mean that you are not offered a favourable deal. Before taking out a loan agreement, you need to go through your budget to make sure you can afford the repayments.
What To Avoid
Loan sharks are one of the biggest dangers when borrowing money, with repayments often demanded quickly to avoid steep interest rates. Consider a credit union or social fund if other loans are not available to you rather than a loan shark.
Try not to borrow more money to pay off existing loans as this may lead to long-term problems.
Do not go overdrawn on your bank account without agreement. An arranged overdraft will incur far fewer charges.
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