Borrowing money is something that most of us have to do in our lives, at some point or another. As much as it can be embarrassing to need to do so, at this point, it’s pretty much just a part of growing up and getting older. No matter whether you do it through a credit card or a personal loan, chances are, it’ll be a big part of your life.
Because of this, the sooner that we can start preparing for taking out loans and making credit agreements, the better. Part of the trouble is, though, that it can be hard to actually get a start on that. Without credit history, borrowing can feel impossible – and ironically, you need to borrow to build up said history.
That being said, there are some ways that we can prepare ourselves for that. Really, when you’re looking to work with a lender, there are just some strategies to take that will give you the upper hand in terms of finding a loan that is affordable and doesn’t require any collateral. These are called unsecured loans, and you’ve probably heard of them at least once before. They’re easily the most popular type of consumer loan out there these days.
No matter what type you’re looking for, though, these tips will be helpful for you. After all, eventually you’ll end up going for some sort of credit agreement. When that happens, think back to what you learned here today.
Start as Early as You Can
By now, surely this is advice that you’ve heard time and time again in relation to all sorts of things. Naturally, we can apply it here as well, although it isn’t quite the same as starting up your retirement fund as soon as you can. In most parts of the world, there is an age requirement for starting to borrow money. At least, that is certainly the case if you’re applying on your own.
That being said, there are ways that you can start building your credit even in your teenage years. It will involve your parents, though – if they take out a credit card or something similar and you are one of the co-holders of the account, then each of the payments made on the balance will reflect positively on your history as well as theirs. Of course, this isn’t accessible for everyone, but it is worth touching upon.
Once you are legally an adult, though, that’s when you can really get a proper start in terms of finances. You might not be able to find the billigste forbrukslån lav rente right away because those typically require a good credit score, you can begin to work up to that point. Credit cards are where a lot of people start – they simply make a small purchase within each billing period and pay it off before their grace period ends.
Compare Your Options
Often, when people are deciding to apply for loans, they don’t spend enough time shopping around between different financial institutions. There’s an instinct to automatically go with the bank you currently have a checking or savings account with, and it does make sense at first glance. Go with the folks who already know you, right?
In this case, though, you can often find a better deal if you look elsewhere. Remember to keep your options open – you can submit as many applications as you want and you don’t have to commit to any of them just because of that submission. Instead, you can browse all of the offers that you got to see what would be in your best interest.
Sometimes you may even want to expand your horizons to looking at foreign lenders! While this will depend on your own preferences to some extent, you can find a lot of interesting offers when you look outside of your home country. Places like Norway have a lot of options for all types of borrowers, for instance.
Watch Out for Interest Rates
Part of the trouble with borrowing money is that every time we take out a loan, we won’t just be responsible for paying back the first amount we borrow. Instead, we’ll also have to pay the interest that our lender charges. On paper it’ll probably look like a very small percentage that you’ll be charged, but it can catch up to you pretty quickly if you’re not careful.
One option that you have is to seek out loans that specifically have “fixed” interest rates. That means that the rate won’t change throughout the duration of your loan. Most of the time this will be beneficial, since over time, interest rates do tend to go up. However, if the rates end up dipping significantly further down the line, it might be something that you end up regretting.
Thankfully, refinancing exists. Because of that, it’s pretty safe to go for the fixed rate option most of the time. There’s very little risk and a high potential reward, which is pretty much the best that we can ask for in terms of finances.
Plan Around Your New Bill
Loans come with bills, and that’s just a fact. To prepare for that, though, you can make a plan ahead of time so that you know how to tackle this new expense. Budgeting isn’t always easy, but it can help make our lives a lot less stressful later on.
Additionally, if you show up to a consultation for a loan with a plan already in mind and a budget in hand, that looks quite impressive to lenders. Showing initiative like that can help you to land the types of credit agreements that we’ve discussed so far – ones with low interest rates and that don’t require any collateral.
Unsecured credit agreements tend to be harder to get than the secured ones because they require more risk on the behalf of the lender. So, it can really boost your chances if you demonstrate that you know your stuff in terms of how loans work and how the repayment period will look for you.
When people hear this phrase, they might roll their eyes or find it a bit pedantic. That being said, it truly is a valuable lesson. The thing is, when we start to spend a ton of money on frivolous things or even worse, on something like gambling (which does include a lot of smart phone application in-app purchases, unfortunately), it can lead us down a bit of a spiral to put it lightly.
This isn’t to say that you should never borrow for “fun” reasons. For instance, a lot of people actually use personal loans to pay for expenses such as wedding planning and vacations. However, when they do so, it’s with a plan to pay it back within the agreed to terms with their lender. They don’t do it knowing that they won’t be able to pay that amount back.
So, at the end of the day, that’s the key to all of this. Only borrow what you know you’ll be able to make those repayments on. If you don’t think that you’ll ever be able to pay off a twenty-thousand dollar loan, for instance, then you probably shouldn’t apply for it in the first place.
What “responsibly” looks like for you will depend, though, since it tends to be different for each person. You’ll have to make that call for yourself. However, if you are able to follow the rest of this advice that’s been shared, then you’ll likely already have some sort of idea of what to expect for this. It’s important to reflect on your own circumstances and finances before submitting any applications for a credit agreement so that you can go into it with the right mindset.
I am the content writer for Allblogsidea, where I love what I do. Writing is my passion; it’s what drives me in life. It makes me happy when people share their stories with the world so they can be heard.