Borrowing Money

11 Things to remember when borrowing money

• Be honest with yourself before you consider borrowing money if you can afford to make the repayments. Consider carefully the impact the repayments will have on your life, and whether or not you have sufficient funds to cover life’s little emergencies while you’re making your repayments. Remember, borrowing money is instant debt.

• Don’t rely on what the bank employee, salesperson, finance company rep tells you. Make sure that you have everything in writing, and take your time to go over the rules and conditions for the loan. Remember that when dealing with these people, their first and foremost concern is to themselves and the company that they work for. You come a distant second, so the only one who can look out for you, is you.

• Don’t sign anything until you are completely satisfied you understand everything in the contract.

• Ask questions if you are not sure. And if you’re still not sure after they’ve explained it, ask again.

• If there are any other aspects to the deal that have been offered verbally, make sure to get it in writing before signing the contract.

• Think carefully about how long the term of the loan will be. While the payments will be easier if you spread the loan out over many years, you’ll end up paying a lot more money in the long run. If you can, it’s better to take a higher payment, shorter period loan.

• Before signing any contract, make sure to get two important bits of information from the lender: What are all the fees, charges and interest rates; and what is the total cost of the loan. In other words, make the lender write down on a separate, blank piece of paper what all their charges and interest rates are, and then, on another blank piece of paper, get them to write down what the overall cost of borrowing the money is going to be for you so that you can see it plain and simple. Then you can determine if the deal is worth it.

• Be very, very careful when offering up security or collateral against a loan. If you must, make sure it’s something that you can live without if the unthinkable happens and you can’t pay back the loan. Take out a secured loan only as a last option if all other loan avenues are closed to you.

• Make sure you understand the consequences of paying the loan off early. Some lenders have a penalty charge for early payment, so be clear about the conditions of the contract before you sign.

• Only borrow money from an authorised lending institution.

• If you have any problem with your lender that cannot be resolved amicably, do not be afraid to take the issue to an independent ombudsman.