A loan is often the first solution that comes to mind when you are about to spend an expense that is not covered in your bank account. This solution is so readily available today that we take out loans almost automatically. The result: taking out loans that cost us a lot of money and dealing with difficulty in repaying them over time. So just before you take out a loan – take yourself into an honest conversation and find out with yourself the following.
a. Is the planned expenditure necessary?
There’s something you really want, but it’s expensive. It seems that the only way to get it is to take out a loan.
Stop for a moment and ask yourself:
- Do I need it right now? Is it possible to wait with the purchase until we can buy the product without a loan?
- Do I need this product? Maybe there is a cheaper substitute? Similar model from last year? Maybe a second-hand product? Maybe you can find it on recycling sites like “Agora”?
- Is this a real need? It is difficult to separate “should” from “want”. Give yourself two days to think about the desired purchase. Sometimes you’ll find that the urge has passed and you’re not so interested in it anymore.
In. Is a loan the only way to finance?
Maybe you can save for the purchase or use existing savings? If you don’t have to buy the product right away – put money aside each month until you have the necessary amount. This way you will avoid paying interest on a loan or on the use of credit, and in many cases you may later find the product you wanted at promotional prices or improved technology.
Gimel. Will we be able to meet the repayments of the requested loan?
Check carefully how much you can pay back each month. Incalculating monthly repayment capacity , also take into account situations such as a decrease in wages or an increase in rent or mortgage. Can’t refund? Do not take a loan.
Have you decided to take out a loan? Do it wisely
Have you asked yourself the questions and come to the conclusion that there is no choice but to take out a loan? Here are some tips for acting wisely when taking out a loan:
1. Take the exact amount required. Don’t take a higher amount “so be it.”
2. The fine print: Check different routes and terms of repayment of loans and payments, based on the repayment capacity you calculated. Compare and don’t hesitate to bargain. Pay particular attention to the following:
- The percentage of interest offered to you on the loan.
- The scope of the monthly and annual payment.
- How much you’re going to pay in total over the life of the loan.
- Penalties are expected for arrears of loan payments.
- Early repayment fee, the possibility of repaying the loan before the termination date, if an unexpected amount of money enters your account.
It’s also important to note that not every loan is something to avoid. Sometimes a loan is indeed needed. For example:
1. Loans to acquire higher education, which will allow you to increase your future earning capacity.
2. A mortgage that allows you to purchase a property and is sometimes cheaper than monthly rent.
3. A loan to open an independent business that allows you to create a future and permanent source of income.
The main thing is to think carefully before taking out a loan and find out honestly with ourselves whether it is a loan that advances us financially or rather one that sets us back.
