Six Tips for Being a Responsible Borrower

Being a responsible borrower

Making the decision to take out a loan can be difficult for those who are on a journey to financial independence. However, sometimes, situations arise in which there’s no other option.

When you decide to take out a loan, the best way to ensure that you’ll get back on track is to follow the principles of responsible borrowing. Here are six things you can do to be a responsible borrower. 

Choose the Right Loan For You

There are a lot of different types of loans available. What works for someone else may not work for you. Some of the things that could impact which type of loan you need include:

  • the amount of money you require
  • your preferred payment times
  • the reason for borrowing
  • your credit score
  • your current financial standings

Taking time to look at your options is the best way to figure out if you can use an extended line of credit or commercial vehicle title loans to help solve your financial problem.

Take Only What You Need

Sit down and outline how much money you need from this loan. You may be purchasing something that has a definitive cost, such as a vehicle or paying surprise medical bills. Alternatively, you might be making an educated guess at how much money you’ll need to start a side hustle and generate more income.

Regardless of the reasoning, it’s imperative that you take only what you need. In some cases, it makes sense to have a small buffer. However, by sitting down and calculating your costs, you will mitigate the need for more cash.

Make a Solid Payment Plan

Once you know how much you’ll be taking, create a payment plan that you can follow. This doesn’t refer to what you’re expected to pay back and when as outlined by the terms of your loan. Instead, the point of this exercise is to determine how you’ll pay it back on time.

The terms of your loan is the goal, your payment plan is the objective. Outline how you’ll earn that money or alter your budget to make room for your payments.

Be Open With Your Lender

You should feel comfortable being honest and open with your lender, and they should return the favor. Don’t hesitate to ask questions before you sign anything. A reputable lender will be more than happy to dive into the details and answer your concerns to the best of their ability.

Additionally, you need to be honest and proactive if you run into an issue with your payment plan. Rather than defaulting on a payment, call your lender ahead of time and explain the situation. Be ready to propose when and how you will make up the payment. 

Understand Your Terms and Rights

The onus is on you to read the fine print of your borrowing agreement and understand the terms. If you have any hesitation, highlight the issues to discuss with your lender and don’t sign until you understand. 

There are laws and regulations in place to protect your rights. If a lender tried to alter your agreement without your consent or didn’t accurately outline the terms in your contract, you have the right to push back. However, if you just happened to miss something because you didn’t read everything or ask questions, the blame lies with you.

Pay On Time

While situations do arise where you might have to delay a payment to a lender, this should be an extenuating circumstance that happens once or not at all. Paying on time is your responsibility as a borrower. If you can’t pay it back on time, you shouldn’t be borrowing it in the first place.

Being a responsible borrower will stop you from getting into a worse situation than where you started. To be financially independent, make a plan to save money so that you don’t have to keep falling into the cycle of borrowing money and paying it back.

 

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