Borrowing money is something most of us will do at one time or another. For some of us, that’s a scary thought. For others, it’s the most natural thing in the world. Where you find yourself on this spectrum probably has a lot to do with how much you’ve borrowed or taken out on credit at this point in your life. Maybe you’re carrying a lot of debt. Maybe you don’t have any. Maybe you have a lot of money anxieties. Maybe you are as cool as a cucumber. People have any combination of these debt-states and comfort levels. How you feel might not actually have much to do with your actual financial health. Sensible borrowing is based on math and personal ability to earn and repay. Here are some things to think about the next time you take out a loan.
Borrowing money is all about the ability to pay. You might be taking out a loan that costs a tremendous amount of money each year, but that doesn’t matter if you can pay it off in two months. People get all up in arms about expensive loans and credit cards. They do so for good reason. Some people get overwhelmed by the expenses associated with these loans, finding themselves in credit death-spirals that can last for the rest of their lives. But people who are able to pay early find that it almost doesn’t matter how much a loan costs at all. If it’s just making ends meet while we wait for a paycheck or other payment, it almost doesn’t matter how much the loan costs. Loans from UK lenders or Panamanian lenders…it doesn’t matter as long as you can repay quickly.
Not every loan allows you to repay quickly, though. Some even charge you extra money for doing so! This won’t apply to every borrower either. Lots of borrowers can’t afford to pay back early, meaning that it’s a lot more important to pay attention to the cost and duration of the loan that you agree to. Loans will have monthly (or other regular) payments that you’ll make until the loan is paid back in full. They’ll also have monthly or yearly interest rates you can examine. This is how much you’ll be charged for the privilege of borrowing the money you are borrowing. The higher the number, the more you’ll pay.
It’s important to shop around for loans with the most agreeable terms. It can be difficult to go through a bunch of loans, but it can help making your long term financial life look more livable. Remember not to ask for loans that perform hard credit checks. A few of these and you’ll drive your credit score so far down that you either won’t be able to get a loan, or that loan will be far too expensive for you to afford. It’s best to borrow only when you absolutely need it, can pay back reliably or quickly, and have the time and resources to shop around for the most agreeable terms.