Smart Tips to Borrow Money

Almost every one of us has a need to borrow money at different stages of our life. Buying a house, paying for children education fees, starting a business and buying a car are just some of the reasons why people have a need to borrow money. 

Borrowing can be an excellent way of building your assets and acquiring the things that you need to increase your welfare. However, there are some Golden Rules that you should keep in mind to avoid getting into financial trouble. Remember that whoever lent you the money expects to get it back. LiveOlive has several tips to help you get the maximum benefit from your borrowing without getting sucked into loan debt trap.


1. Borrowing from Banks/ Financial Institutions

 The smart way is to shop around for the best deal ---whether it’s for mortgage, car loan, or other types of loans --- and discuss the details before you sign any documents. After you decide to take a loan, add strain on your income and monthly budget until you pay it off.

 The not so smart way is to borrow more than you need. The extra amount would only cost you a lot of money over the lifespan of the loan.

 2. Borrowing from Credit Card Issuers

 The smart way is to use your card as a payment option only when you’re sure that you can repay the amount charged within a short time. Also, it’s good to avoid the zero interest credit cards because these promotions are typically only for short-term solutions like balance transfer.

 The not so smart way is using cash advances to pay for expenses rather than having a monthly budget or an emergency fund to pay for unexpected expenses. The interest rate for cash advance is high and it’s charged from the day you take out the money. Never think that the credit limit on your card is your money.

 3. Borrowing from Family or Friends

 The smart way is to write down some key points -- how much you borrowed, how and when you intend to repay it, and if you have to pay interest. Make a copy and give it to the person you borrowed the money from. It will save a lot of misunderstanding and keep your relationship in harmony.

 The not so smart way is to forget your promise to pay back the loan. When you borrow from someone you know, they won’t charge interest or confiscate your belongings if you don’t pay them back, but you’re risking your relationship with them. It is a sure way of losing your friends and causing tension within your family.

 4. Borrowing from Pawn Brokers

 The smart way is to go to a broker that has been recommended by a friend you can trust. This is the last option if all else fails, so you have to fully understand the agreement and be ready to lose your collateral if you can’t pay back the loan with interest.

 The not so smart way is to borrow from a broker that you don’t know and make verbal agreement without written documents. In that case, you are placing yourself in a dangerous situation because you neither know the interest rates, penalties, or due dates.


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