At some point or the other in life, it may become inevitable to borrow money, either from your friends, from the bank, or from digital finance solutions. In instances where I, personally, have had to either borrow or lend people money, I have come to the realization that there are responsible and irresponsible ways of borrowing money.
When you borrow money, you shouldn’t look at it as extra finances, but rather as something that will eventually have to be deducted from you. The perspective you should take is that borrowed money takes away from your pool of resources rather than adding to them. It’s no wonder the Waswahili have the saying “kukopa ni harusi, kulipa ni matanga” (borrowing is a wedding and paying, a funeral).
Here are some responsible money-borrowing tips.
- Understand what you sign up for
We’re all likely to fall prey to signing the terms and conditions without knowing what they are in detail. This is how you end up in trouble. You have to understand the intricacies of the documents and what they entail. That way you are able to make an informed decision based on your capability to pay back the loans.
- Borrow only what you can pay back
Try to only take risks that you can deal with. Don’t borrow money blindly without knowing the strategy you’ll use to pay it back. You also have to consider the interest accrued, and understand that you will need to pay all of it back. The lender may offer you a large amount of money if you have an excellent credit score. However, that does not mean that you will be able to afford to pay the loan back. Don’t borrow more than you need. Finances: How You Deal With Debt Can Make You Or Break You! What Are Your Debt Habits?
- Think about why you are borrowing the money
People borrow for many different reasons. It could be for a medical emergency, or it could be to buy a luxury car. Whatever your ‘why’ is, make sure it is valid. If it is for earning opportunities, for example, to start a business, then it might be okay to borrow money at first. Because once you start earning, you can easily pay back the money that you owe. However, if it is to simply spend on something new, it would be best to put off borrowing money for now. It could take you time to earn back the money which will be a burden for you in the future. Finances 101: How To Create A Budget And Different Budgeting Methods You Can Use
- Budget for repayments
Just as you budget for your monthly commitments, the repayment of debts should be budgeted for. Why? So as to ensure that you don’t accrue interest month after month. This will also keep you accountable as you go about spending money daily. In the back of your mind, you will remember that you have a debt to service.
Finances 101: How To Create A Budget And Different Budgeting Methods You Can Use
- Pay on time
By planning how to service your debts, you avoid problems like higher interest rates and lowered creditworthiness. Make sure that when you take out a loan, you make repayments on time. If for some reason you are unable to make a timely payment, call your lender. It’s always best to maintain communication with the creditor. Not only is it the responsible thing to do, but it may also help to protect your credit rating. Finances: Borrowing In Joy But Payback In Sorrow – Why You Need To Work On Clearing Your Debts
- Ask to borrow politely
When you are requesting a loan from an institution, person, or group of people, learn to be polite about the situation. You are not entitled to receive the money. The person is entitled to reject your offer, and even if you know they are in a position to help, do not take it to heart. It is better to assume that maybe there are some things that they are not comfortable letting you borrow. You should approach borrowing with humility. In the end, there are more chances of someone lending you something if you approach them in a kind and humble way. 5 Ways To Deal With Your Friends When It Comes To Money
Why Are We So Bad With Money? Would Financial Education In Schools Help With This Issue?
Personal Finance: Practical Steps To Get Out Of Debt
Finances: The Pros And Cons Of Hire Purchase And Paying In Instalment Options
10 Tips For Borrowing And Lending Money To Family And Friends
