Deciding to take a loan is a life changing experience as many thing – financially – have to be considered one of the most important being ability to repay.
What are the important aspects that you should consider before taking on a big loan?
Rent of buy decision – sometimes deciding to own a house rather than rent with it brings many headaches including property taxes, interest costs, and housing costs- that you could well do without. So prepare a detailed spreadsheet to decide whether its better to own or rent a house. If you are also a frequent traveller or your job requires mobility around the country it may be better to rent rather than own.
Interest rates tend to fluctuate wildly over time so always consider interest cost into the equation when you decide to borrow – if the rate is too high always postpone the purchase.
Collateral value – of your house may drop drastically if the housing market collapses leaving you exposed so always have an expert advice on whether its the best time to buy.
Buying Assets – always look for a seasonal cycle when prices are low or when the seller is desperate – time your purchase in such a way that you can afford to wait for a longer time to get a better deal for a lower price from a seller who needs to sell fast and leverage your position.
Competitive quotes – obtaining them is vital to ensuring that you get the best deal – go shopping around all the banks and don’t be afraid to bargain. Most banks will be flexible when it comes to interest rates especially when you have a good credit score or can offer good collateral.
Credit card debt – is the one way to take a loan without knowing it – banks are counting on you not knowing how much it costs to finance credit card expenses – purchasing and financing debt through the credit card is one of the most expensive ways to do it so always look to ensure that your income is adequate to repay your credit card outstanding at the end of the billing cycle fully.
Create a reserve – always pay yourself first – creating a reserve can help you get out of debt and stay out of debt forever. Just be smart about the way that you save, spend and invest and you could be a well off before you know it.
Planned debt does not always mean you need to take a loan to buy assets – postponing purchases may just give you enough breathing space to make enough cash to buy it outright.