For first-time borrowers, entering the world of credit can feel incredibly daunting. How are we meant to borrow responsibly or even intelligently at all if we don’t really know what’s going on? Alas that this is often what ends up happening because of a general lack of education and explanation during our schooling years. Because of this, the internet has come out of the woodwork to fill in those gaps. Today, that’s what we’ll be trying to do here as well, specifically when it comes to landing yourself the best, most affordable loan that you possibly can. While it can get a bit complicated sometimes to figure out what you’re supposed to do or how to do things like apply for a loan, once you get the hang of it, it’ll become a breeze!
Thankfully, there are a vast wealth of resources out there available to anyone who wants to get involved in this stuff. Whether you want to use loans as a form of investment, you’re looking to get one to cover an expense, or you want to use them for a home or car, you’ll be able to get some answers. For now, though, here’s a list of some borrowing tips that might come in handy as you look at consumer loans that don’t have collateral.
One: Always Compare Lenders Before You Commit
When we’re just starting out, it can be really tempting to just go with the first loan that we get accepted for. After all, when all we have is a “fair” credit score and zero borrowing history, it can be hard to find a lender that wants to work with us. However, even in these circumstances, it’s important to “shop around” for different loans.
Why is that? Well, something that you’ll want to keep in mind here is that lending is a business. Financial institutions are constantly competing to get more borrowers because that’s how a lot of them make a large portion of their profits. So, when you’re looking for a loan, take that into account. Often, you’ll be able to find a better deal with someone else if you know where to look.
Of course, that won’t always be the case, but it’s still better to be safe than sorry when it comes to comparing the different rates that you can get. Try to aim for the lowest possible interest rate that you can, comparatively with the length of the loan of course. Some of this can require complicated calculations, so it may help to look at a site that does it for you. Getting help to find the beste loan that you can is certainly nothing to be ashamed of – that’s what those sources are there for, after all.
Two: Make a Budget and Stick to it
For most folks, this is probably the most difficult part of this entire process. To comfortably and responsibly borrow money, you need to be able to ensure that you can pay it back in a timely fashion. As much as we can speculate about being able to, it’s not a certainty unless we do the number crunching to make sure of it.
Naturally, that’s where budgeting comes into the picture. Thankfully, most lenders have ways to look at what your projected monthly payments would be, so you can factor that in as you plan. This means that you can think about what your new bill will be and add it to your other expenses to see how much money “leftover” you will have after you are paid.
There isn’t much of a point in going through this whole thing if you don’t end up sticking to your budget afterward. So, if you’re looking to get a loan that has a low-interest rate and works, you’ll want to keep this in mind first.
Three: Try to Accrue “Good” Debt
Now, maybe when you see this, your first thought is that there’s no such thing as “good” debt. At the end of the day, we will always have to pay it off still, and that’s never much fun. However, there are types of debt that are good to go into – let’s examine why that is.
For the most part, experts consider “good” debt to be anything that you borrow money for that serves as a form of investment. It doesn’t have to be an obvious thing – for instance, student loans count as this type of debt because you are investing in your future when you enroll in college courses and work towards getting a degree.
Some other types that count are for buying properties or other sorts of assets; since those can eventually accrue enough value to give you a return on the original purchase. Essentially, if you can benefit somehow from accruing the debt, then you are on the right track.
Four: Talk to Your Lender
Open communication is something that should be encouraged in pretty much any “relationship”; and that does include the one that we have with our lenders. Make sure that you’re always being open and honest with them about when you are unable to pay a bill on time. This can help to lessen the potential of defaulting, because you can sort of protect yourself against it.
That being said, it’s just a generally good idea to communicate with your lender even if that isn’t what’s going on. That way, if you ever want to do something such as refinance your loan; you will already have a relationship with them to some extent. They’ll be much more likely to want to do that sort of thing if they know you and can trust you, after all.
Five: Make Your Payments Automatic
One final piece of advice to keep in mind is that even when you budget and have all of that sort of stuff handled; it can be all-too easy to forget when to make your payments. To avoid that sort of thing happening, though, you can set them to be automatic. Of course, there is some risk when you do that as well, since it could end up overdrawing your account if you aren’t careful.
Still, though, that’s better than just totally forgetting a bill that you’re supposed to pay, right? At the end of the day, it’ll be up to you to decide whether or not that’s something that you want to contend with. Having this as a backup can be quite handy though.
For the most part, if you’re smart about how you go about borrowing; then it will be worth taking out a loan or signing onto a credit agreement. You’ll be able to build your credit as you pay off those bills; which can also help you when making bigger purchases in the future. As complex as it seems to be to get involved with these sorts of things; it’s at least worth getting more familiar with it, right?
As with any type of credit agreement, though, it’s quite important to manage your spending and borrowing habits. Don’t max out a bunch of credit cards and take out loans to pay for things that you don’t need; and know that you can’t pay for in the future. Additionally, be cautious of any loans that require collateral.
Conclusion:
What you’ll probably want to look for are loans that are “unsecured,” which means that they don’t require collateral. This is just something that serves as a safety precaution for us as borrowers; because staking an additional thing of value on our ability to pay back a loan is quite risky. It’s certainly better to keep safe rather than sorry in that sort of situation, isn’t it?