There are times when borrowing money can be suitable for you and your financial setup. Maybe you’re buying a new home and you’re trying to work out how to cover the costs of a property purchase. Perhaps your car’s broken down and you need to get it fixed.
Whatever the reason that you’re considering this type of funding, it’s important that you take the time to work out if this is an appropriate course of action based on your financial setup. By looking at what you need, you can decide if this is a route for you. To help, here are some pointers that could make borrowing work for you.
Think carefully
Before you borrow any money, weigh up the pros and cons. What do you need the money for? Is it something that could be funded in a different way? Is it urgent?
It can be easy to take out a personal loan or credit on the spur of the moment, especially if something significant has happened like the boiler’s broken down in the middle of winter. But make sure you consider all possibilities before you go ahead and borrow as you’ll be tying yourself into a repayment schedule and you’ll have to make sure you can pay it and the interest in full.
What’s your budget?
If you are still leaning towards borrowing, look at your current monthly income and outgoings. This will help you to see how much you could realistically set aside for loan or credit card repayments. Budgeting for this before you start researching what could be available to you is a good starting point as you’ll know your limit for monthly repayments.
Do some research
Shop around and search for the best deal. Consider the interest rates and weigh up what could work. This research stage gives you the chance to see what borrowing options you have before you jump in and commit.
Also, avoid applying for lots of loans at once because this can negatively impact your credit score. And when you’re comparing what’s available, keep the loan amount and repayment terms consistent so that you get a like-for-like comparison.
Consider your credit score
Being approved will depend on your current setup. If you have an impeccable credit history, you’ll have plenty of options. If, however, you’ve struggled to meet repayments in the past or your credit score isn’t great for other reasons, a bad credit loan could be something that works for you.
You can improve your credit score, however. You could, for example, register on the electoral role. This simple update proves where you live and impacts favourably on your score.
Keeping up with payments on something like your mobile phone contract or other regular bills will show that you know how to handle your debts properly. The longer the history with the provider, the better. This can shows you’re a good debtor.
You can double check your report, too. Go to the three main credit referencing companies: Experian, Equifax, and TransUnion. You’re entitled to a free report from each of these once a year. Check through your report carefully and look out for any mistakes. Something as small as a misspelled street name can affect your score.
Don’t get overdrawn
Once you’ve borrowed money, avoid getting overdrawn. Also, stick to your repayment schedule. If you can keep this up until you’ve paid the money back, you could find that borrowing has been a beneficial addition to your finances – especially as paying on time and avoiding going into your overdraft is good for your credit rating.
