Three tips for those who need to borrow money

There are times when you may look at your financial situation and realize you need some help. You might have gone over budget in your spending or been faced with unexpected medical bills, urgent repairs to your home or car, or other expenses. Whatever the reason, you are investigating the possibility of taking out a loan to get you on your feet. That may be the best decision in your particular circumstances. However, as with any other financial commitment don’t rush into a loan agreement blindly.

Use the following three tips to become an informed consumer and borrow wisely.

1: Check out various sources for loans or other financial assistance. Although you may be in a bind and feeling pressure to get your hands on some cash immediately, try to take at least a couple of hours to investigate with the help of the Internet. All lenders are required by law to disclose their interest rates (expressed as the Annual Percentage Rate, or APR) and the total cost of a loan.

Find out the APR, additional charges and other terms and conditions, such as the length of the loan period, offered by several lending institutions. This will give you an overall picture which will form a solid basis for comparison of the different lenders.

2: Think about how you will repay the loan before you commit. Plan ahead and be realistic about your expected income and fixed expenses, such as mortgage or rent, automobile payments, etc. Do not commit to repayment terms that you already know are impossible.Work out a careful plan in advance that will permit you to avoid late payment penalties, loan rollover charges or possibly even court fees.

Throughout the entire period until the loan falls due, focus on your goal of punctual repayment. Don’t ignore the debt, assuming it will take care of itself. Instead, cut your spending and take on temporary extra work such as babysitting or pet care.

3: Take steps to avoid emergencies like this in the future. With a non-judgmental close friend or a financial counselor, go over the circumstances that forced you to seek a loan. Think about how you can do things differently in the future and avoid the trap of taking out an endless cycle of loans just to get by.

Look at your household income versus expenditures.An objective advisor can help you find ways to reduce your spending in certain areas. In addition, if you found some moonlighting work when you were pushing to get the loan repaid on time, you might want to continue with it and try to build up a small emergency savings fund. That way, you won’t feel backed into a corner by minor financial crises.

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