Borrowing money is a big decision and one that should not be taken lightly. When deciding to borrow money, you should carefully consider all avenues beforehand and prior to committing to borrow money online or otherwise.
As the cost of living in the UK rises, more and more people are borrowing money for a variety of reasons. Some UK residents may borrow a small amount of money to cover unexpected monthly costs or large amounts of money for emergency expenses. Nevertheless, it is important to know how to borrow responsibly so that you are managing your money in the most effective way possible.
How to Borrow Money
When you need to borrow money, there are many options to choose from and consider. For example, before borrowing in the form of any loan, you may wish to seek professional financial advice.
Alternatively, you could talk to a trusted family member or friend who could lend you money. This way, you could avoid any unaffordable interest rates while maintaining your credit score.
Or, you could apply online to borrow money from a trusted lender. While loans have their drawbacks, there are many advantages to them. For instance, there are a variety of loans available to UK borrowers. Some of the most popular options include:
What Is the Best Way to Borrow Money?
There are no recommended ways in which to borrow money in any form, and the financial product a borrower does opt for will depend on their preferences and financial situation. Before borrowing money, either online or in-store, it is important to consider your options before you decide.
For example, you may be due a large payment from an employer or as a result of a company bonus but need some money in the short term to get you through a tough period. Or, you may have overspent one month and need some additional money in order to avoid falling into further and potentially unmanageable debt.
Shop Around
A survey from Shawbrook Bank showed that only two-fifths of consumers spend time shopping around or comparing loan options.
Do your homework before deciding to borrow money and check that you are able to afford the interest rates within the repayment terms. Spend time researching what options are available and potentially seek expert advice. Although this can be time-consuming, it can save you a lot of money in the long run.
Make sure to look at the APR and additional fees to know exactly how much you will need to pay back. In addition, when carrying out your research, try to use lenders that offer a soft credit search so that you are not impacting your credit score while reviewing the different available options.
Only Borrow What You Can Afford to Pay Back
When considering how much money you want to borrow, think about the total amount you will have to repay, taking into account APR, additional fees, and the repayment period. Also, make sure you have evaluated and prioritised your debts , so you have a more accurate idea of how much money you actually need to borrow and for how long.
You need to ensure that you can meet your monthly repayments. Otherwise, you can end up worsening your debt. Thus, before borrowing money, make sure to work out your budget and see how much you can afford to pay back each month.
Be as thorough as possible when creating your budget, taking care to include not only your essential monthly expenses but all of your additional outgoings too. The more realistic your budget, the fewer surprises you will have in the future and the easier it will be to keep track of your spending.
Read the Terms and Conditions Carefully
Before entering any loan agreement, make sure you have read the terms and conditions carefully. For example, many lenders will charge additional fees for late payments and early repayments. Therefore, make sure you know what these are, as it could impact how much you will be paying back in the future.
When you take out a loan, you will also need to sign a credit agreement. This agreement will outline all of the details of the loan, including when payments are due, the cost of any additional charges, and your right to withdraw.
Make sure you review these terms and conditions carefully to avoid incurring added costs or negatively impacting your credit score. If there is anything that is unclear, make sure to clarify this with your lender before signing any papers.
Think About Why You Are Taking Out the Loan
As well as thinking carefully about exactly how much money you need to borrow, you should also consider why you are borrowing the money in the first place. For example, if you are borrowing money to pay off existing debts, you could be perpetuating long-term financial problems.
If you are looking to fund an expensive purchase, such as furniture or a car, there may be other payment options available that may be cheaper than a high-interest loan.
Beware of Predatory Lenders
Think carefully about whether the lender you are looking to borrow from is trustworthy. If the lender is not requesting a credit check or for you to put up any collateral, you might be vulnerable to predatory lending, especially if you have a poor credit history. You should also always make sure you fully research a lender before borrowing money in any instance.
Borrowing from a predatory lender could mean that you land yourself in more debt, which is difficult to come back from.
One way to ensure you are working with a reputable lender is to request a copy of the lending licence. Most lenders will readily provide you with this information or will already have it displayed on their website or in their brick-and-mortar location.
Which Is the Best Money Borrowing Option for Me?
As mentioned above, there is no best way to borrow money. This is because each borrower will have different needs and financial capabilities. Therefore, when deciding what is right for you, consider the previous factors. If you are still unsure, consider contacting a financial adviser to discuss your unique situation and options.
