Is it Right to Borrow Money When you have a Family?

If you have a family that you are financially responsible for then you will be right to think hard before getting a loan. Obviously, you have a commitment to make sure that you have enough money for the children, but there are still circumstances where getting a loan could be helpful.

What is the loan for?

It is worth starting by thinking about whether you can justify the purpose of the loan. You need to think about the benefits of the loan and whether it is worthwhile. Sometimes it is easy to decide and other times it is not. If you are getting  money to treat yourself to something you do not need then it is better to wait and save up for it but if you are borrowing money to buy a home then this could have a very positive impact on your future as long as you are confident that you can afford to do it as you will save money on rent. It is good to think about the benefits of the loan and consider whether it really is necessary for you to borrow the money. It is not always easy to decide this and so it could be worth discussing it with other people; perhaps friends and family, who will be able to help you make a good decision.

Is it too expensive?

As part of your assessment it is worth trying to find out how much the loan will cost you in total. The costs will include the interest payments and any charges. Consider what you are buying with the loan and how much it will cost you overall. Imagine if the asking price of that item was that much, whether you would buy it. You may be perfectly happy to pay that much for the item, but it might make you think twice about buying it. Try to think without emotion, which can be hard. You might feel you would pay anything for an item but realistically you will have a limit to how much you can afford.

It is worth making sure that you are looking at getting the right type of loan for you. Loans have different purposes and you want the one that suits your purpose the best. They vary in cost so try to get the cheapest type of loan that you can and also try to go with the cheapest lender. You also need to think about the amount that you borrow. If you borrow more then the loan will be more expensive. Therefor, borrow the minimum that you can, making sure that you use any savings that you can first so that you keep the costs down as low as possible.

Can you afford it?

It is good to consider how much the repayments will be and whether you will be able to afford these. If you miss a repayment then there will be additional charges that you have to pay and these will be high. These will make the cost of the loan and the item you are buying with the loan much higher and you need to be aware of this. It is so easy to just take out a loan and think about the repayments afterwards but so important to plan how you will repay first. Consider whether you will normally have enough money and if not, what you will have to change in order to ensure that you can afford it. You might have to reduce your spending in other areas, which will be easier for some people than others. You may need to find ways to earn more money, which can be very difficult for some people as well. Consider what might work for you.

It is important to make sure, that if you have a variable rate of interest on the loan, that you will be able to afford the repayments if the interest rate goes up. A short term loan is lower risk with regards to changes in interest rate and getting a fixed rate loan will protect you against rate changes anyway. However, if you have a long term loan with a variable rate then there is a real risk that the interest payments could go up and you will need to make sure that this is something that you will be able to afford.

Once you have done all of this research then should have an idea as to whether you can afford to take out a loan or not. You will not want to take as many risks if you have a family. Make sure that you are confident that you will be able to keep up with the repayments and that you will feel that the loan has been worthwhile once you finish paying it all off.

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