Is This the Right Time to Borrow Money? 

Avoid the Borrowing Blues

In a desperate situation, borrowed money can seem like an easy way out.  But countless people have been crippled by student loans, credit cards, and car payments.  A loan is a binding legal contract, an agreement to pay back the money borrowed at the agreed upon interest rate, on time.  Frivolity is no attitude to have when it comes to debt.  Despite external pressure from friends, family or the general standard of living, money should only be borrowed at the right time and in the right way.

The Purchase Must Be Made

The purchase needs to be evaluated to make sure it is a necessary one.  If the item in question is not absolutely essential, then it probably can wait.  Every store and website is offering “low-interest”, “risk-free” financing for high-end products, and it seems every shop has its own credit card. 

But seeing a new product in the store or online, or on the lot, is not a good enough reason on its own.  There can be good times to take out loans on houses, cars, and maybe some high-end appliances, but the purchaser needs to make that decision, not the slick salesman with a reassuring smile.  Just be sure that the item is something needed, not something wanted, and that your monthly income allows it.

A Great Credit Score

A credit score is a three-digit number that expresses how likely an individual is to pay back money that is borrowed.  It is calculated based on the amount of debt currently held, payment history including late payments, and the number of loan applications filed.  If a person’s credit number is not high enough, they may not even be able to borrow money.  Or if they do, it could be at a highinterest rate, or with some other caveat that could prove disastrous later when paying back the loan. 

All Options Have Been Evaluated

Is this financial service center the best place to take out this loan?  Is there another, less expensive item that would work just as well?  How long would it take to save up for this item instead of putting it on a credit card?  These are questions that must be asked before borrowing money. 

Buying on impulse rarely yields positive results.  Taking one’s time, investigating all possible lenders, and comparison-shopping products will ensure the best option since it is done without too much emotion clouding the decision.  It may also save a buyer hundreds of dollars in the end. 

The Payments Are Affordable

This is usually the first question asked, but it should not be.  The major sales tactic for most financed products is the affordability of the payments.  Student loans, for example, tout the endless payback possibilities – but that is only one part of the picture.  The contract must be thoroughly read to ensure that those low payments are not extending the life of the loan or only paying off interest charges. 

Sometimes hidden fees or changes during the life of the contract can drastically increase the payments.  Financial decisions like borrowing money cannot be rushed and must be thorough and level-headed.  Putting thought into when and how to borrow money can lead to financial success in the future.