8 tips for borrowing responsibly

8 tips for borrowing responsibly

Life is unpredictable. You can go through life and do everything right - buy only what you need and save 15% of your salary for a rainy day. But th

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Life is unpredictable. You can go through life and do everything right – buy only what you need and save 15% of your salary for a rainy day. But then your car breaks down, you lose your job, you have a health scare, and everything you managed to save disappears within seconds and leaves you in debt. So, in such a situation, what should you do?

Negotiated loan terms

Photo credit: Andrea Piacquadio / Pexels

Suppose you end up in a situation where you have to borrow money but are afraid of getting into debt. In that case, it does not have to be a scary situation. Borrowing carefully and within your means can significantly affect your financial situation.

So in this article we give you an overview of all the best tips and tricks aimed at borrowing money.

1. Find a Borrower with a Relaxed Credit Rating Policy

A good and stable credit score is mandatory to secure a loan. But at the same time, there are many other options that can give you money, even if you have a poor credit score. Instant loans are such an example of loans that do not require a significant credit score.

When deciding to approve these loans, many lending facilities worldwide will consider factors other than the borrower’s credit score, such as their service history and income. For example, if you live in a country moving to a cashless economy (like New Zealand), many financial institutions allow you to borrow money anytime, anywhere. One good example is instant loans Nectar NZ, a leading digital lender in the country.

2. Make your case

When you take out a loan, you need to complete an application, describe your entire financial position, and sometimes even state collateral. Preparing a short presentation outlining why they should lend you the money can help the lender see how serious you are about the loan and why you need the funds. Include information such as how you plan to use the funds, how long it will take you to repay the loan and how much interest you will pay in return.

3. Establish clear repayment terms

“I will pay you when I can” indicates that repaying the loan is not a top priority for you. This is significant because almost three-quarters of people who borrow from family or friends do not repay the loan. Explaining exactly how you will repay will significantly increase confidence in your willingness and ability to make payments.

Include information such as when you will start making payments, how you will make the payments and how much you will pay each month. You can also show them your monthly budget if you want to go the extra mile.

4. Sign a contract

The most important thing to do when borrowing money is to document everything – even if you are borrowing from someone you know.

The details discussed must be written down and signed before the funds are distributed, and you must both receive a copy of the agreement as soon as it is signed. If any disputes occur, refer to the loan agreement rather than arguing about something you agreed to months or even years ago. In addition, keeping your financial documents will help you manage your money and stay organized.

Borrow money

5. If you have to borrow, borrow the smallest possible amount

Doesn’t that sound ridiculous? Why would you borrow more than necessary? However, once you are underwritten for a line of credit, it is easy to spend too much. This is common with car loans. Many people justify their excessive purchases with the statement: “I can afford the payments.” We’re not saying you should not drive a $ 80,000 car, but only if you can afford it in cash. If you borrow money to buy a car, you should never borrow $ 80,000 when a $ 35,000 car gets you there just as quickly.

6. Learn more about the interest rate and fees

You need to understand the fees, interest rates and payment terms before accepting the money to avoid benefiting. Payday loans are an excellent example of a loan that should be avoided at all costs due to their high interest rates and fees. Here is an illustration. Suppose you expect a salary of $ 1,300 in two weeks, but need money immediately. A payday lender may be willing to lend you $ 1,000 today and then take the total of $ 1,300 when you earn your salary. That’s $ 300 in fees and interest, equivalent to a 780% interest rate!

In contrast, the average 30-year mortgage has a rate of about 4.5%. The interest rates on credit cards range from 10% to 25%. In addition, other types of debt, such as prepayment loans for tax refunds, loans from finance companies, pawn shop loans or credit card cash advances, have high fees.

7. Make a financial cushion for yourself

The amount you need to save depends on the size of your needs and income, but saving enough money to cover six months’ expenses is ideal. This, of course, makes you appear to borrowers as a perfect lender. Yet it also allows you to deal with urgent costs without borrowing and lowers your debt-to-income ratio.

8. Make timely payments

Once you start making loan payments, you need to do it on time. Late fees are not a fun way to spend money, and poor payment history can negatively affect your credit. Get yourself structured with monthly bill payment. Even better, set up automatic payments; you can even save money on your interest rate. If you choose the latter option, keep track of your bank balance, especially if you have numerous automatic withdrawals. It’s easy to overdraw without noticing it.

If you have extra cash, apply it to your loans as well. It’s not as glamorous as a new vehicle or wardrobe, but it will save you money in the long run. Paying more than the minimum is an excellent way to quickly reduce loan debt.


We hope you now know how to borrow like a pro and within your means. To borrow only what you need and make timely payments, lenders show that you are responsible. Then make sure you get the right lender and that they work well for you and your budget. Lastly, one of the most important benefits of becoming a responsible lender is that you will be able to offer yourself better opportunities.


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