Should I get a Loan?
There are many reasons why we might consider borrowing money. Some people will just get a loan without thinking about the consequences and others will think hard about it. It is worth always thinking about the loan before taking it out, even if it is just a small one. There will always be consequences, both good and bad, when borrowing money and that is something that should be thought about before you borrow any money.
How much will it cost?
It is good to start by finding out how much the loan will cost you. If you take out a loan which has fixed regular repayments you should be able to calculate this. You can find out how much you will be repaying each month and for how long. This will allow you to calculate how much you will repay in total and you can work out what the costs will be. This can be quite a shock sometimes, as when you look at an interest rates it means very little but once you work out how much this is in monetary terms then you can get a good feeling for how much it will actually cost you. With some loan types this is more difficult as there is no scheduled repayment plan. Things like credit cards and overdrafts are more difficult to calculate because you do not have to repay them within a certain time. However, if you calculate how much you have to pay each day or month then this can still help to give you an idea of how much you will have to pay overall.
Obviously choosing a loan such as a payday loan online that is cheaper can help to reduce the cost and this is something to consider at this stage as well as only borrowing the bear minimum. Comparing loan types and finding the right one for your purpose and only borrowing the smallest amount that you need will really help. This will help to keep your costs down which will enable you to get better value from your loan and more easily be able to afford the repayments.
Can I afford the repayments?
It is really important to think about how much the repayments will be. You need to consider that they will need to be paid every month if you have a loan that requires this. Find out how much you will be expected to pay and use this information to calculate if this is something that you will be able to afford. If you are not sure then look at the statements for your checking account and see whether you would have been able to afford it in previous months. If not, then see whether, if your budget, you would then be able to afford it. This is something that you have to think about very honestly and decide not only whether you could afford it but also whether you would be able to stick to a budget and ensure that you could cover those repayments.
If you have no repayment schedule then you should still plan how you are going to repay your loan. You need to consider the costs of having the loan outstanding for a long time and how if you have a plan to repay it then this will help it to be cheaper. It might be that you choose to pay regular payments higher than the minimum, to get the credit card paid off more quickly or that you choose to try to spend less or earn more so that your overdraft is repaid more quickly and you do not go overdrawn again.
Will it give me good value for money?
It is worth thinking about whether the loan will provide you with good value for money. This may seem like an odd concept as we tend to normally only think about things giving us value for money if they are physical items that we buy but the same can be applied to loans. In order to evaluate it you will need to think about what you are using the loan to buy and what value you will get from that both in the short and the long term. Consider the cost of the loan and whether you are happy to pay that much money extra for the items that you are buying with that money. You also need to think about whether the loan might cause you any stress or whether you might find it difficult to make the repayments and cover all of your other financial commitments. If the loan is a large one then you will need to be making repayments for a long time and this could mean that you will have to imagine how you will feel about doing this. You should also think about whether your financial situation is likely to change and what impact that might have on your ability to repay the loan in the long term.
Are Store Cards Worth Having?
There are many stores that will now offer cards to customers so that they can buy things right away and delay paying for them. These have advantages and disadvantages but it is worth giving them some serious thought before signing up. You want to make sure that the card will work for you. If you already have one or more then think about whether you are using them to your advantage or whether you are overpaying for them.
How the cards work
A store card works in a similar way to a credit card. You will use it to buy items in the store and then after a number of weeks you will receive a statement which will show how much you have spent. You will then get the option to repay the minimum amount owing which will be the interest on the card and perhaps a little more or the whole balance. It is also possible to pay off any amount in between as well, although not everyone realises this.
The card can usually be used in that particular store and any branches of that store in other cities or states. It may also be able to be used in other stores that are linked with that particular one. Unlike a credit card they are limited in that you can only use them in certain stores rather than being able to spend them anywhere.
How they can cost you money
If you repay the store card in full then you will have to pay no interest or fees. However, if you decide not to repay the full balance then you will have to pay interest on what you owe. If you do not even repay the minimum balance there will be additional charges that you will have to pay. These costs are made pretty clear and so you will be aware of how much you will have to pay. However, there may be other costs that you are less aware of.
It could be that you choose to shop at a particular store because you have a store card. This may be because you want to take advantage of not having to pay for the goods right away but it could mean that you avoid shopping in other places that might sell the goods for cheaper. This means that you are paying more than necessary for the items. You may also be tempted to spend more if there are any special offers in the store for card holders. It may feel that you are saving money if you are buying things on special offer. However, we often buy things that we normally would not buy, just because they are on offer. It can feel like you are saving money because you are getting things cheaply, but you are actually paying out money and therefore spending more than you would have done otherwise.
How to use them to your advantage
There are advantages to having these cards though but you have to be careful when using them. You can delay when you will pay for items and so as long as you are careful to make sure that you will have enough money available to pay them in full when the statement arrives, you could end up better off if you can get some interest on the money you have put by while you are waiting for the statement to come.
If you enjoy shopping in the store and their prices are good, then you might be able to take advantage of some of the special offers that they might have available. It might be that you will be able to save a significant amount of money buying items that you would have bought anyway but that you can now get at a significantly lower price. You do need to be sure that you really are using them to your advantage though and not being tempted to buy things that you do not really need.
Some people will see a store card as a way of having more things and they will not think too much about repaying it. They will just spend on it and enjoy the items they can buy and not repay the card. This can get very expensive and because of the interest charges you could end up paying significantly more for the items than you would if you did not use the card. It is therefore really important to only take out a card if you can trust yourself to not spend on it without thinking and without repaying the full balance when needed. You should know yourself well enough to know whether it will be a good idea for you to get the card or not. It is a decision that is well worth thinking hard about.