Since money is our medium of exchange for acquiring goods and services, living without or short of it can toss us into a bad financial situation. Every time we find ourselves sinking financially, we are worrying and finding ways to stay afloat. Again, the solution is money.
Though borrowing cash is a good choice to pay off your bills, it can also give you headaches if you don’t know how to make a wise decision. The money you owe can help improve your life but being involved in too many debts will give you more financial problems.
In this article, you will learn the tips and tricks on getting a loan without hurting your life and being broke.
Good debt or bad debt?
Before you venture on borrowing money, it is important to know your purpose. It’s easy to be attracted at fancy things but do they give that much of a value? Examine your financial situation. Good debt is designed to pay for things that will give you long-term benefits while a bad debt simply fulfills your current needs or demands.
Good Debt includes:
Student loan – getting an education and college degree is one of the ways to a successful life. You’ll get a job, better career choices and earn more money lifetime.
Mortgage loan – purchasing a home is a basic family necessity. This investment has advantages since you can sell your house and gain profit over time.
Bad Debt includes:
High-interest Credit Cards – debts with interests larger than 20% are expensive and cause you more problems.
Discretionary Expenses – taking a loan just to fund your vacation, buy new clothes, and other non-essential purchases is not a healthy habit at all.
Do some Calculations.
A slight mistake can cost you a lot of money during payment time. Start by looking at your income and expenses. If you borrow more than you can pay, chances are you’re getting deep into your financial trouble.
When you are purchasing something, let’s say a car, identify if you are paying for the right price. For instance, making regular monthly payments will just cost you more and can hurt your finances. You might consider making a larger down payment to give you more breathing room or choose a car that is less expensive than what you desire. If the payment feels more of a burden, it means you are doing it wrong. Be practical and pay only what you can afford.
Calculate not just the present situation but the future. You don’t know if you might lose your job one day and if you and your partner can sustain all your financial needs. You may end up borrowing money again and make additional payments. Income changes so it’s safe to only borrow money at a comfortable level.
Make sure you’re getting the right loan.
What type of loan are you getting? Short-term or long-term? What are the interest rates? The key here is to get the loan that is a perfect match for your need. If you are planning to fund your business, you can be stuck between a personal and business loan. Experts advise that you should avoid risking a home equity line of credit if you are unsure that you can pay off the loan. Otherwise, you may end up losing your home in foreclosure if the business fails.
It’s better and a lot safer to apply for unsecured loans. However, it will hurt your credit score if you are not paying accordingly. (at least you’ll not get your car repossessed or be kicked out of your home)
Generally, the option that many has taken is the installment loan. This type of long-term loan is easier to obtain and usually has lower interests and are paid on a monthly basis. In contrast, short-term loans or payday loans are more expensive and are paid on a weekly basis or in an agreed due date.
Where to get installment loans?
A good loan will not hurt you but instead, help you slowly reduce your credit. There are many small credit institutions like Instant Loan that offer to fund for both your personal and business needs. They can help you build your finances and you can apply to them online.
Credit unions and local banks – look around your community for credit institutions that lend money with the purpose of helping the neighborhood gain financial freedom. This can be your top choice.
Online lenders – some of the available options are available online and you might get funds from non-bank institutions that offer lending options.
Peer to peer lenders – these are individuals that lend their money to fund your loan.
Can you borrow money with bad credit?
Having a poor credit score makes it difficult to apply for a loan. Chances are you will get rejected or get approved but with higher interest rates which end up you paying more than what you are purchasing. Bad credit is really frustrating so you might consider getting your credit repaired to improve your chances of getting a loan with lower interest rates.
Repairing/Rebuilding your Credit.
Since a low credit score puts you on a disadvantage, rebuilding it is the best option. You can improve your credit by repaying your bills and monthly payments on time. This indicates that you are a responsible payer and helps build your credit reputation. When you are applying for a loan, the majority of lenders look at your credit score to see if you are capable of repaying your debt. You may occasionally check your credit report and learn how it works.
Unsecured loan (Collateral)
Sometimes, getting loan approval takes risking your assets. Putting your car or home as collateral can be a popular choice but what if you are unable to make payments? Are you willing to lose them? Will you still be able to generate income and make up for your finances? Who are the ones who will suffer?
Ask friends and family for help.
They are your last resort if your loans end up rejected. Talk to them and explain in detail why you need some money and for what purpose. This may seem awkward at first since it can ruin relationships. Have a conversation with them and state your expectations and plans on repaying the money you will borrow.
Another useful tip is to ask them if they are willing to cosign a loan for you. The higher their credit score income statement, the higher the chance they can help you to qualify.