Most people find that getting approved for their first loan is fairly easy. When you have decent or limited credit, lenders are willing to take a chance on you. You’ll get multiple opportunities to receive loans and credit cards without much complication. Yet, once approved, most take on too much too soon and suffer the consequences. If not disciplined and responsible when given these financial opportunities, borrowers end up digging themselves into a hole that can take years to get out of.
Anyone with bad credit or who has recently been denied for a loan will tell you that it’s a privilege to get approved for funds when you need it. With this privilege, however, comes a great deal of responsibility. Once you have signed on the dotted line, you’re contractually obligated to repay the funds within the agreed upon amount of time. Failing to do so has adverse consequences including negative credit ratings, increased fees, collection, loss of property, and more. The best way to avoid this is to get disciplined. Here’s some advice:
Only Borrow What You Can Afford
The biggest mistake borrowers make is accepting more money than they can afford to repay. If you need an installment loan of $500 to cover a personal emergency, but get an approval for $1,000, it doesn’t mean you should accept it. Make yourself aware of the interest rate and monthly installment plan to determine if it is something you can afford every month until it is repaid. If you can’t afford it, then you should not accept it.
Read Your Agreement
Getting approved is exciting and it can cause you to simply sign without reading anything. This is a big mistake. Responsible borrowers want to review the terms of the contract before signing on the dotted line. You need to have a full understanding of what is required of you and what is required of the lender. If there is something you don’t agree with and you sign prematurely, you’re legally obligated to follow the guidelines of the contract anyway.
Pay on Time
The biggest thing you can do as a borrower is pay your loan back on time. At the initial signing of the contract, the lender will explain how much is due every month and when it is due. You should make note of this and incorporate it into your monthly budget and even find ways to cut back until the balance is paid in full. Set up automatic withdrawals or reminders so that you don’t forget.
Reach Out if There’s Trouble
Another problem that borrowers have is hiding when they’re in trouble. Life happens to everyone and there always seems to be some financial attachment. The loss of a job, a loved one, a divorce, a medical emergency, anything can set your finances off temporarily or permanently. Lenders do realize this and will work with you, if you are willing to come forward. If there is something going on that has affected your ability to repay a loan, then you need to contact the lender right away. They may have additional services or payment options to offer you to avoid going through the negative collection processes of retrieving their funds.
Loans are convenient financial products provided to consumers when they need more cash. They can help you go to school, buy your first home, get a car, pay some bills, take a trip, and so much more. In order to continue to receive the benefits of such products, however, it is imperative that borrowers be responsible. Being aware of your responsibilities, paying on time, borrowing what you can afford, and reaching out if you’re in need are all ways to ensure that you can continue to gain access to cash when you need or want it most.