Whenever you borrow money, make a finance purchase, or take out a loan, you need to make sure you are making the right decision for you. Lending money means you are making a commitment to pay the money back within a certain time frame and at a set interest rate.
Failing to meet these commitments could lead to serious financial issues. This is why it is imperative that you consider things like affordability and what to do if things go wrong and you need a class action attorney how borrowing money could affect your future finances before you sign the dotted line.
While it can be tempting to accept the money without hesitation, you need to stop and ask yourself these four things:
Should I make the purchase now?
Most purchases that you are planning on making aren’t always as necessary when you take further consideration. In reality, you can postpone most purchases, to allow you time to save up and buy them in cash rather than going into debt.
You will save money in the long run if you save instead of finance purchases, this is because you can avoid having to pay interest on the funds you borrow. A good way to minimise the amount you borrow is to only purchase necessary items like a washing machine on finance and anything recreational save for.
Could You Choose Something Less Expensive?
When you’re already spending a large sum on a purchase, it can be really tempting to go all out and buy top of the range, with all the added features. However, when you’re putting yourself into debt for a purchase, it’s wiser to scale back and buy an older model, or research where to find the lowest prices. A great example of this is when you’re buying a car, do you really need to buy new or could you save yourself a lot of money by opting for an older version.
Can I Afford To Make The Repayments?
This is a very crucial question to ask yourself, it’s also extremely important for you to be as honest as possible. Think about all the limits this purchase may impose of your financial status in the future. You may not be able to go on as many holidays, or you may not be able to save as quickly as before. If the restraints you have to put into place are too restrictive you may end up regretting the purchase you were originally looking forward to making.
How Long Does It Take To Pay Off My Loan?
You need to ensure you are clear on all the terms and details of the loan, including how long it is going to take you to pay it off in full. You need to bear in mind that interest payments can eat away at your hard earned cash. You need to consider aspects like if you are able to pay it back early, charges you may get if you miss a payment, and what your minimum payments each month will be.
These 4 areas are all really important for you to consider before you sign on the dotted line of any loan. It is important for you to remember that sometimes purchases can wait and looking after your finances is important.