Questions to ask yourself before you borrow
There are many ways to purchase goods and services and using credit is one of them. When you borrow money, it’s important to understand how credit works, the different types of credit products and the cost associated with it.
If you are unsure whether credit is the right option for you, below are a few questions you should ask yourself before applying.
What am I borrowing money for?
For the purpose of spending and saving money wisely, every person must know the difference between needs and wants. Are you borrowing credit because you want to go on a holiday? Or do you need credit to pay your rent and other bills?
Is borrowing the right option?
Credit may not be the right option for everyone. Fees, charges and interest rates can make credit very expensive, especially if you borrow more than you can afford which could lead to the possibility of getting into debt.
There are many other ways to reach your goal without the need to borrow. You could save up for that holiday or put your purchases on lay-by and gradually pay them off over time. If credit is a necessity and you are on a low income, you may qualify for a no or low-interest loan.
Can I afford the repayments?
Be realistic and honest about your financial situation, the last thing you want is to borrow too much credit that you can’t afford to pay back. There are a great range of articles about budgeting in our Learning Hub or check out these financial calculators to help you work out what your repayments would be.
Is now the right time to borrow?
Take time to evaluate your current personal situation, do you foresee any upcoming changes that might affect your income or your ability to make repayments? If so, you might want to rethink borrowing until your financial situation becomes stable.
Have I checked my credit reputation?
Credit checks are an unavoidable part of borrowing. That’s why banks, lenders, telcos and other credit providers use credit scores and credit reports and their own scoring system to assess your credit application. Checking your credit reputation regularly is important as you can find out where you stand financially, access better rates or deals to save money and decrease the impact of identity theft.
Here at Credit Savvy, we offer free and complete access to your Experian credit score, credit report summary and all the other resources to make sense of them both, so you can understand credit and achieve a greater financial wellbeing.