The Smart Way to Borrow Money

Borrowing money is a tricky and sometimes scary process, but it’s sometimes necessary to help you buy the things you need, take care of your business’ cash flow, fund your education, start your own business, and so on. In this article, we are going to talk about the smart way to borrow money and the things you should consider in this process.

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  1. Make sure it’s a good debt.

Good debt is a kind of debt you use for something that will eventually appreciate. It also allows you to manage your finances more effectively, buy things you may need to deal with unforeseen emergencies, leverage your wealth, and so on. Some examples include taking out mortgage, investing in your education, buying things that save you time and money, etc.

If you are looking for a small business loan, that is one good example of good debt as well. But if your business is already ongoing, you have to make sure the cash injection has a good purpose; for example, dealing with tangible cashflow issue or purchasing new premises or machinery. Small businesses need cash injection to keep things afloat, but it should be utilized for the benefit of the business and should be efficiently managed.

As much as possible, avoid consumer debt. This type of debt will not appreciate. Its money spent mainly for fleeting enjoyment. You are to enjoy the purchase for just a short period of time, but the interest payments you make will run for months or even years. It’s not practical, and it may just end up harming your finances. Thus, it’s better to save up for that vacation or new gadget than to fund those wants with consumer debt.

Other examples of bad debt include credit card debt and payday loans. Credit card debt piles up quicker than you realize, and it’s usually used for buying wants rather than needs. Also, most items bought through credit cards depreciate in value. Payday loans, on the other hand, though very easy to acquire, may be harder to pay back. The interest rates are too high, and most payday loan companies make the most of people desperate for cash. Even a small loan amount may cost a fortune when paid back.

  1. Borrow the right amount

After having made sure that the purpose of the loan is good, it’s time to sit down and determine the amount you need. This depends on the plan you’ve set for the money. You also have to thoroughly plan making the repayments. Never borrow more than what you can afford to repay. This will only lead to unwanted troubles plus more fines and fees.

You would not want to handle a huge amount of debt that you can hardly repay, especially if you’re going for high-interest options. The amount should be within your means and should be realistic. To be sure, you should take into account having backup options in case your finances will further struggle in the future. This doesn’t mean you also have to lowball the amount you need. Just estimate an amount enough for your needs, but not too much that you can no longer afford the repayments. You should even consider the lifestyle factors. Consider whether the repayment of the new loan may affect your lifestyle or not.

As for finalizing the amount to borrow, consider your DTI or debt-to-income ratio. It’s the total monthly bills you have divided by your monthly income. Most lenders prefer debt-to-income ratio under 35%.

  1. Make sure you’re clear about the terms and conditions before taking a loan product

Understand the overall cost of the loan, how much the interest rates are, the amount of time required to repay, and the fine print of the agreement. Always read the terms and conditions thoroughly. This is a golden rule. You don’t want to end up with unpleasant surprises like most people who weren’t keen enough with the details. Some lenders notoriously slip in clauses which are loaded against you, the borrower. So make sure you understand everything or seek the help of your financial advisor or accountant before signing the document. Especially if you’re still new to all this, you need to understand how it all works before you seal the deal.

  1. Avoid Late Payments

Late payments can lower your credit score and may also increase the interest owed. The lender may also impose late-payment penalties or increase your interest rate. This is a costly mistake and may just make the repayment of your debt take longer.

If you can no longer keep up with your repayments or you have problems dealing with your debts, you may consider reaching out to a credit counselor that can review your credit report and credit score. You can also work together with your chosen credit counselor for your debt repayment plan.

  1. Try Online Lenders

Online lenders have made it easier to borrow money these days. It’s become a huge industry which makes it easier for borrowers to acquire their needed funding. The following are some of the benefits:

  • Quick approval- Some online companies’ approval process is almost instant. They readily tell you whether you’re qualified or not, the amount you can borrow, as well as the repayment scheme. Borrowing money through traditional banks usually take longer and although you can fill out application forms online, you may still have to visit the branch in person. Borrowing money online is generally faster and more efficient.
  • Better rates- As long as you shop around thoroughly, you may come across online lenders that charge way less than the rest. You can enjoy lower service fees and smaller interest rates. Online lenders also have lower overhead expenses than credit unions, banks, and other options with physical branches, so there’s minimal regulatory costs. This means you get to pay less and enjoy better deals than the traditional options.
  • Easier approval- Credit unions and banks are generally warier when lending money. You need to have a great credit score to get approval. On the other hand, online lenders can help you get approved even with lower credit scores. They may use alternative information to assess your creditworthiness like your utility payments and even information from your social networks.
  • The loans are unsecured– This means you do not need to have a collateral to get approved. This is a safer way to go about the process without borrowing against your assets. If you are unsuccessful in repaying your unsecured loan, your credit score will be negatively affected, but you won’t have your car repossessed or deal with foreclosure.

How to Borrow Online

Borrowing money online may seem easier, which is most likely the case. But you still need to provide all your relevant personal information like your address, Social Security number, etc. The exact details required depend on the lender. Most likely you are to input information about your income and your job, your expenses, among others.

You just need to choose a reliable lending partner and then send your application. Usually, it just takes some minutes.

  1. Choose a Reliable Lending Agency

Here’s the most important bit. It’s essential to work with the right company that can give you the best deal and the best level of support you need. One of the most recommended companies you can check out is Credit Star Funding.

This agency is linked to a huge network of lenders and banks, and they have been in the industry for many years. Especially if you’re an entrepreneur who needs funding for your start-up idea, purchasing a franchise, entering a real estate venture, participating in partnerships, entering the forex or stock market, and so on, Credit Star Funding is one of the best options around.

Their application and processing system is patented, and they qualify people fast—even those with lower credit scores. They can cater to those with credit scores of 620 and up. Plus, you can borrow more money here.

Probably the best thing about Credit Star Funding is how they not only let you borrow money but guide you every step of the way as well. They even go the extra mile to help you with your financial education and help you secure financial independence in just a few years’ time. Their funding officers are up and ready anytime you need a personal loan or a business loan online. They can even help you with your credit repair problem. They can legally remove your bad items and cloak your existing debt in order to balance the credit usage for more funding. Even if you think you have the worst credit report, Credit Star funding will come to your rescue.

Borrowing money should be done the smart and efficient way. And that means planning your borrowing purpose, lending options, and loan amount properly.   It’s also important to know the process to the letter and choose the right partners to make it all happen in a smooth and manageable way.