WHAT TO CONSIDER BEFORE BORROWING MONEY? 

1. REVIEW YOUR BUDGET

Before you borrow, it’s important to assess your budget and ask yourself these questions:

• How much do you need? Think about why and how much you wish to borrow. It might help to list the specific expense you’re covering. Check this out money lender in Singapore
• Can you afford the monthly payments? Take a close look at your income and current expenses to determine what you can afford to pay back each month. Ensure this won’t stretch your budget too thin.
• Is this expense urgent? If possible, ask yourself if the expense can wait. Saving up can sometimes be a better option if the expense is not immediate.
• What if interest rates increase? If you’re considering a loan with a variable interest rate, know that your monthly payments could rise if rates go up. Be prepared for these possible changes.
• What happens if you miss a payment? Missing payments can lead to fees and affect your credit score. Verify that you are aware of the repercussions of missing payments.

2. GOOD DEBT VS. BAD DEBT

Not all debt is created equal. Good debt typically involves borrowing for something that will increase in value over time or improve your financial situation in the long run. For instance:

• Home Renovations: Borrowing to improve your home could increase its value.
• Student Loans: A loan for education could lead to a higher-paying job, which may improve your ability to repay the debt.

Bad debt, on the other hand, involves borrowing for items or experiences that do not increase in value or help your financial future. Examples include:

• Vacations: Going into debt for a vacation could lead to paying for it long after the trip is over.
• Luxury Purchases on Credit: Using credit to buy expensive items you can’t repay by the end of the month could lead to interest charges and increased debt.

When borrowing, try to focus on good debt, as it can offer long-term benefits. Avoid bad debt, as it can quickly grow and become difficult to repay.

3. WHAT TO EXPECT IF INTEREST RATES RISE?

If you have a loan or line of credit with a variable interest rate, your payments may go up if interest rates rise. This can impact your budget significantly if you’re not prepared for it. To manage this risk, consider setting aside some extra funds or opting for a fixed-rate loan if you’re concerned about fluctuating payments. Understanding how interest rate changes affect your loan will help you make better financial plans and avoid unexpected payment increases.

4. REVIEWING YOUR CREDIT ORLOAN AGREEMENT

Before signing any loan or credit agreement, review the terms carefully. Check the interest rate, fees, and repayment terms to understand exactly what you’ll owe each month. Often, you may be able to negotiate some of the terms with your lender, especially if you have a good credit history.

Make sure you understand everything in the agreement. If any part is unclear, ask your lender to explain. For instance, ask about fees for missed payments, early repayments, or added services. Lenders must get your consent before including extra services with your loan or credit account, so be clear about what you’re signing up for.