Thinking Before You Borrow Money

Borrowing money should never be a simple decision, but it must be thought through carefully before. Borrowing money without doing the work before properly increasing the risk that you will end up with future financial problems.

Here we will present in a series a list of a number of points that you should consider. The sad truth is that it is better to think about before than after.

Does your finances manage to borrow?

Does your finances manage to borrow?

The first and most basic to go through is how your or your finances look at the moment. Loans always come with extra costs that a space must be provided. Of course, there may be exceptions such as moving from an apartment with an expensive monthly cost to a cheap house. Where the loan cost and all other costs can be lower than what the housing cost previously. Not very ordinary, but possible.

A larger private loan that extends over many years can easily cost USD 5,000 in repayments and interest each month. Smaller loans that have shorter maturities can also cost similar amounts without any problems as the repayment is so great. Mortgages of several million can, although the interest rate for these is low, cost much more than that every month.

Figure out what your finances can do and then figure out what the intended loan would cost you per month. The basic rule here is that if you are least hesitant if you can afford, you should skip borrowing money and try to find another solution instead.

House here is a good example since you may not be able to afford the house which is centrally located and is in top condition. But you might be able to afford a house that is a little further away as they can usually be millions cheaper. Or why not buy a house with renovation needs that you fix over time. Often there is a solution that does not cost as much.

Do you have to borrow?

Do you have to borrow?

Really as basic as point one is to really investigate if there is a need to borrow. Loans can be divided into a few different categories depending on how you see it. Here I intend to divide them into three different parts.

Consumer loans

These are loans that are only for pure consumption or which you can probably call it for pleasure. This includes money to be used for clothing, electronics, holidays, etc. It doesn’t have to be wrong to lend to this but there are no things you “must” have. Certainly it is nice to lie on the beach on some warm southern island when it is cold here at home in Sweden. But to say that you have to do it is not true.

If this is the question of consumer loans, then you should be very confident of advice and that it is really worth the price. For you can most certainly add a number of thousands of dollars to the cost in the form of interest rates.

Accommodation

Loans generally have a pretty bad reputation but if there is any type of loan that does not have it, it is a loan for housing. It is simply not reasonable to have so much money saved on the bank that a whole home can be purchased for these. The vast majority of us are thus forced to borrow money to be able to buy a home and there is nothing strange about this.

Then just because it is an okay loan basically you should not stop using the brain for it. As I mentioned in the paragraph before, a home can cost very different depending on where you buy. Now as I write this the interest rates are very low so even a little larger loans do not cost very much every month. If you borrow 1 million you can expect about 900 USD in interest per month and if you borrow 4 million it is more close to 3,000 USD per month. Big difference but no huge costs that can easily fool you. For as we have said, low interest rates are now and they will only reach up to a few percent more, it can easily end up with 2,500 alternatives USD 10,000 a month only in interest rates. This is then calculated after adjustment. Nowadays, there is also a requirement for amortization that is not included here at all, which can be at similar levels as the interest cost per month.

Good Finance

The last type of loan I intend to take up here is one that can be called a utility loan. Here I think loans that are needed to solve an important situation, simplify life or improve something. Examples of this may be that problems arise with the roof of your house which is expensive to repair, you need a car to get to work or that you study and think about CSN loans or not.

When it comes to loans of this kind, it is difficult to say how good it is to borrow in advance, as the situation varies from one occasion to the next. If you have broken roofs, it must be fixed and you have no other option than to borrow, you must.

Buying a new car may also be compulsory but here it is a bit like the house. This expensive brand new nice car is a much bigger cost than that 5 – 6 year old at a much lower price.

Borrowing money to study is often a good choice as the interest rate here is not high and you should invest in yourself during this period of life. Of course, you can work extra and so on and withdraw enough money. But working a lot of extra just to afford and then may not be able to cope with the studies properly is not a good solution.

A payday loan is really just a payday loan as long as you stick to it. Fixing the roof is useful but putting on extra nice roof tiles instead of the cheap ones that work just as well but are not as stylish slides into consumer loans. Same with the car where the one that smells new car is probably consumption while the used one is a much better deal financially.

Any questions you may ask

  • Do I really need to borrow from this?
  • Is it worth the extra cost I get each month?
  • Do I need this right now?
  • Can I save money instead until I can afford it?

These are some good questions you can ask yourself to really find out if you need to borrow money or not. Just be sure to be truthful when answering the questions, not as it is sometimes easy to think that you need something more than what is actually true.

Type of loan that is right for you

Type of loan that is right for you

What one can easily say is that loans with some kind of collateral are cheaper as lenders here can feel safer to get their money back. The most common form of this is mortgage loans. Car loans have long been loans with collateral, but here many lenders have started to go from this but instead offer ordinary private loans for this type of purchase.

If you lend money to a home, the question of a mortgage is quite obvious, but it is actually possible to use this for other things as well. The prerequisite for this is that you already have an accommodation that is not fully mortgaged. If you can borrow money on your house, it is most definitely better than any other loan even the money is used for something else.

Private loans or loan loans, also known as standard loans, are available for people who want to borrow for something more general. The interest rates on these are higher than mortgages but in return you can use the money for anything as long as you pass the credit check.

Quick loans are not strictly any form of loans, but are often regarded as such regardless. They are really just smaller private loans that are available very easily. What you can say directly about these is that you have to be very careful before obtaining such, as the costs are often high in relation to the amount of borrowed money.

If you follow the links above, you will not come to the various departments here on the site that take up the different types of loans more carefully.

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