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Money Advice For You

Helping you look ahead


Borrowing Sensibly

Most of us need to borrow money at some point in our lives, whether to tide us over until payday or to buy a home, however, it is important to borrow sensibly and to ensure that you don't over-extend. Choosing the right borrowing mechanism for you will help you do this.

Borrowing needs to be repaid and different kinds of loans are usually repaid differently. You should only take on borrowing if you can comfortably manage the repayments. Short-term borrowing is more flexible, but obviously you'll pay higher interest for this kind of flexibility.

But no matter what you are borrowing for, it's important that you choose an amount and term which you can comfortably afford.

  1. Work out exactly how much you can afford to pay each month and then choose an interest rate that suits your circumstances: Fixed rates will ensure that you pay off the same amount each month. Variable rates will go up and down, but they will allow you to pay your loan off early as you can pay off lump sums as you wish. You may want to opt for a split loan, where some of your repayments are at a fixed rate and some are at a variable rate.
  2. Consider your payment options. Your payment schedule should suit you and if necessary, take advantage of any payment breaks to help you manage your loan
  3. If you have any difficulty paying back your loan then talk to someone early, as they will try and help you to find a way to manage repayments that you can afford

Important things to remember

The cost of borrowing can add up if you are not careful, so follow these tips:

  • If you apply for a loan, it's important that you get the right loan for the right purpose.
  • Whichever you choose make sure you pay it off as quickly as you can and don't over-extend yourself.
  • Remember its money that's not yours and has to be paid back, usually with interest, so whatever you buy costs you more in the long-run.
  • It's important to keep a budget. See our Keeping a budget - the basics
  • If you don't need something straight away, why not save for it? It's cheaper. See our guide to Savings Advice.

Book a Money Advice meeting

If you feel your borrowing is getting out of hand and you are in real financial difficulty, get help as soon as possible.

Go back to EBS Family Finance

Go forward to Dealing with Debt

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