5 Tips: This is to avoid the pitfalls of borrowing
A loan can bring the much needed relief in case of unexpected expenses or when your own finances are temporarily in imbalance.
It is a good idea to take care of your own finances and manage the monthly installments of your loan on time. A smart borrower plans to take out and repay the loan before signing the contract, as unpaid loans lead to extra late payments and payments that are several months late can lead to default and debt collection.
Here are five tips for avoiding the pitfalls of borrowing and applying for a smart loan:
How much loan do you need?
Before applying for a loan, think about how much you will need. Need a loan to buy something or help with your everyday purchases? Need a loan for the full amount, or can you pay off part of the savings?
Flexibility or overdraft can be a good solution when you are not completely sure about your loan need.
How well do your finances withstand loan servicing costs?
An overview of your finances is in place before you apply for a loan.
Find out your income and expenses and find out how much monthly installments you can pay off your loan.
Often a small loan will be repaid at least EUR 100-200 per month, but with larger loan amounts the monthly installments will also increase. Can you handle these monthly installments on time?
Also take into account the small margin available in case of unexpected situations. Will the loan be repaid even if there are a couple of bigger bills to be paid in a month or for a holiday?
Check out the lender and loan terms
Unreliable loan services have been largely cut off from Finland. Nevertheless, it is not worth borrowing anywhere.
It is always a good idea to read the service and loan terms carefully before taking out a loan. It is important to be aware of credit pricing and other terms and conditions before applying.
You should not take out a loan for nothing
There is no need to be ashamed of taking a loan. On the contrary, a well-considered loan is a great help in many situations from unexpected expenses to financing everyday purchases.
Still, it is not smart to take out a loan for all your vanities.
Think twice about borrowing for a weekend getaway or a luxury you can’t really afford.
Contact the lender in case of payment difficulties
There should be no trouble with a deliberate loan, but illnesses, layoffs, or big unexpected bills, for example, can put plans back on track.
When you encounter payment difficulties, you should always contact your lender for advice.