Do I really need to borrow money?

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Should I Borrow Money?

Taking out a loan is not a decision which should be taken on the spur of the moment. Sometimes we can allow our emotions to get the better of us. We may feel under pressure to pay off an outstanding bill or an emergency expense has sprung up and needs dealing with immediately.

We know that there are hundreds of websites and offers out there and it can be confusing which leads to poor loan decisions.

Our suggestion is to take a moment and decide to you really need to borrow money?

We at Cashute are firm believers in responsible lending. We do not wish to see people furthering financial problems by taking out short term loans that they may find difficult in repaying.

To help you make the right choice we have written this article to assist you;

Do you really need to borrow money?

Once bitten, twice shy, as the old expression goes. The recession most us had to endure in 2008 and the dot com crash of 2001 are still fresh in most people minds and since then we have had a weather eye on the state of the economy.

We are cautious not to over stretch ourselves by borrowing more than we can comfortably afford, for example not getting a new car every three years or spending on more than one holiday per year.

As much as we look after the money, we have in our bank accounts there will always be that unexpected expense and suddenly we need to get a loan quickly rather than spend our savings.

Borrowing money will mean that you will have to pay back the borrowed money plus interest.

The Financial Conduct Authority have initiated tougher rules on direct lenders in the UK meaning that you will never pay more than twice the loan amount.

Under stricter FCA control lenders are more cautious as to whom they now lend their funds to but provided you might their conditions you will be approved for a loan.

Is there another solution to your problem?

Other than approaching a commercial short-term loan provider what are your other alternatives to getting the money you require?

The options are as follows:

  1. Borrow money from your friends and family

Borrowing money from friends and family could lead to problems down the line if you do not pay back the loan or they refuse your request for a small loan in the first instance.

  • Ask your employer for an advance on your wages

Your employer may simply refuse to do so and they might see you as a flight risk in that they think you might leave for a better paid job elsewhere.

  • Login into eBay and sell any unused or unwanted items laying around the house.

There are only so many things you can sell before you are sitting in an empty house

As you can see each of these have their plus points and negatives;

Can It Wait?

Do you really need to borrow money right away, is the money for a purchase which can wait another week, or month or maybe you don’t really need to purchase whatever it is you need the instant loan.

If the purchase can wait try putting aside each week a little bit of cash towards the purchase, once you get to maybe 40-50% of the purchase cost then reconsider once again if a loan is the right thing for you or if you can continue to save so you can buy whatever it is outright and not have to owe money to anyone.

Although should you decide to take out a short-term loan at this point your principle (The initial loan amount) will be much smaller.

Short-Term loans should only really be used for emergency situations and not to be considered for luxuries like holidays, new T.V or latest gadgets.

Do it really need it?

Sleep on it. It is a feeling we have all had, we see it and we instantly wonder how we could have possibly lived all these years without it.

It will always be the same, the latest gadget, the shiny new thing we saw on T.V sported by top celebs.

Here is how we at Cashute deal with it. We simply sleep on it. This means exactly that, walk away and let those initial impulsive feelings of “Fear Of Missing Out” or simply FOMO subside.

If a week or a month later, we still feel we would like to own whatever it is then we decide if it is a need or a want. Will it improve our lives in anyway or are we just buying it for the sake of it?

Can you buy the thing second hand used rather than new? Go to your retailer and ask if they have ex-display items, all my P.C’s and Laptops are ex-display I simply insert new hard drives (Security Purposes, I am very tight on security) and voila I have great machines at the fraction of the cost.

Do your research on what you need to borrow for.

Do your research, don’t be embarrassed to haggle for the best price and certainly always, always be prepared to walk away from the shop if you do not get the deal YOU want.

Take your time researching the appliance you want, weigh up all the benefits and drawbacks. Look at warranty, will the retailer give you an extended warranty for free.

When you do decide on the appliance you and need to take out a short-term loan make sure you read all the terms and conditions for the loan. If you have any doubts about the loan then contact the direct lender and ask them directly,

Do not sign a contract without reading the terms. This is your responsibility. Look at the interest rate, look at how much money you are required to pay back each month and if there are any fees associated with the loan application. Remember, short term loans can be more expensive than traditional loans

How much should I borrow?

Easy, as little as possible and as much as you can comfortably afford.

Borrowing money is not a terrible idea, everyone borrows money, you, me, corporations, governments, everyone! How much money It depends on what you are going to use the money for.

The amount which you do decide to borrow has to be based on how much you can comfortably afford to pay back each month over the period of the loan.

Never borrow money as a short-term loan unless it is for an emergency. Borrowing money to buy property as an investment is a different issue as here a property is an asset which bring in money rather than say a car which is a liability i.e. it will cost you money unless you are renting out your car then it becomes an asset.

Can you down grade?

Do you really need today latest gadget? Did you not feel the same way about the gadget’s predecessor? Why not buy last years model? It is probably exactly the same other than a couple of features and in any event, this years’ model will soon become last year’s model in only a few short months.

Retailers always want to get rid of old stock so you might find yourself with a bargain on your hands.

But do not buy a second had used appliance unless it is refurbished by the manufacturer and comes with warranty, a lot of large retailers offer this option.

Once you have chosen your purchase you can now decide on how much money you need to borrow and importantly how much you will need to pay back each month.

Meeting the Monthly Repayments

When you apply for a loan always be clear on how much money you are expected to pay back each month, if you are in any doubt contact the direct lender with your questions. Never enter an agreement which you are not 100% comfortable with or understand completely.

But the loan repayments is not the only consideration. You have to consider if whatever you have purchased is going to require constant maintenance. For example if you purchase a car what are the expenses associated with its upkeep? Such as insurance, fuel, tax, maintenance like tyres, bulbs, fluids.

If you purchase are house, there are consideration such as council tax, gas, electricity, cleaning, general maintenance. 

All these things cost money to keep going and you have to consider the economy, how is it doing? How is your job, how long can you continue to pay for upkeep and maintenance if you lose your job.

We suggest that each month you put aside at least 10% of your monthly wages. Setup a bank account into which this money will go into and you will not touch and after 5 years you will have the equivalent of 5 months wages sat there, this could be used for many things even as a deposit to buy a property.

Debt management agencies are regulated by The Financial Conduct Authority

Seek professional Advice

Many people in the U.K struggle with debts and many do not know how to start to repay them. Speaking to a debt advisor is one of the best things you will do along with taking action yourself by speaking directly with your creditors.

https://www.nationaldebtline.org/ and https://www.moneyadviceservice.org.uk

You should always seek professional advice when handling debt problems. Cashute are not licensed debt advisers and any information contained in this article should not be taken as legal advice. It is your Responsibility to seek out correct legal advice

Conclusion

Do not take borrowing money lightly. Always consider alternatives before applying for a short-term loan.

Related post

Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk