Questions to Ask Yourself Before You Borrow Money

Posted on 2014-02-20

If you find yourself in need of a loan, you should answer a few important questions before you borrow money. Otherwise, you might end up regretting taking out a loan in the future. If you want to avoid creating more financial problems for yourself by taking on a loan you really don’t need or cannot repay, take a look at these tips.

Is This Purchase Really Necessary?

In some cases, the need to borrow money means you are living beyond your means. Of course, everyone has the occasional financial emergency, and many people are not prepared for it, which is why lenders are necessary. But before you borrow money for your purchase, make sure it is a need, not a want.

For example, if you need a loan to fix your car so you can get to work, borrowing money is probably a wise idea. On the other hand, borrowing cash so you can buy the latest television is not. If it’s something that can wait a few months while you save up the money, that’s usually the best route to take.

Can I Afford to Pay the Loan Back?

If you do not have any extra money right now, what makes you think you will in a few weeks or months when it is time to repay the loan? Before you commit to borrowing any money, you should find out what the payments will be so you can be sure you can afford them.

If it turns out the payments are rather low, consider repaying the loan early, especially if the interest rate is high. The sooner you pay it off, the less you have to stress about ensuring you repay the loan by the deadline. Missed payments can negatively affect your credit score, which is why making sure you can pay the loan back on time is important.

How Much Will This Cost Me in the Long Run?

Before you make this decision, you should think about how much the loan will cost you once you add up the interest and any fees. For example, if you make monthly payments, you should calculate how much you will pay in interest every month until the loan is paid off.

At that point, you will see what the total cost is, and then you can ask yourself if it’s really worth it. If it turns out that you will be paying double the initial price when you borrow money with a high interest rate, you might decide the transaction is not worth it!

This is why accepting money from loan sharks is not recommended, since many borrowers find that they pay way too much in the long run. Instead, find a reliable money lender like Sumo Credit, Max Credit or GT Credit that offers a reasonable interest rate and payments you can afford.