Lenders are willing to make the loans because borrowers pay back th emoney (principal) plus a fee( in the form of interest ) for using it. It is costly to borrow, thus one in general should avoid excessive borrowings.
The three rules always to follow include:
1. Make sure all purchases made by loans are absolutely necessary. Using credit prudently to finance big-ticket items like cars and a roof over the head may be necessary for most of us. However the real danger is using credit to make frivolous purchases.
2. Make sure you have the means to repay the loan. If you are in doubt that you have the ability, then you probably don't! Make sure that your budget can accomodate the loan payments.
3. Constantly monitor your debt level and do not let it get out of hand!
Switch to other loans as one can save a sizeable portion of your interest payments simply by switching to another loan. If an unexpected expense is creating a short-term credit problem, it is possible to juggle one's bills. Current expenses such as rent or housing loan or food must be paid first. Phone and utilities could be delayed.
In cases where the debt could not be settled in a few months, the best approach might be for the borrower to discuss with the creditors. The borrower should settle his problem with the creditors by explaining his circumstances ie why he is overextended and arranging a repayment plan. If the borrower shows sincerity in settling his debt, creditors may go along with the reasonable replayment plan under which they will receive their money, though more slowly. Bankruptcy should be viewed as a last resort until all other avenues have been exhausted.
The three rules always to follow include:
1. Make sure all purchases made by loans are absolutely necessary. Using credit prudently to finance big-ticket items like cars and a roof over the head may be necessary for most of us. However the real danger is using credit to make frivolous purchases.
2. Make sure you have the means to repay the loan. If you are in doubt that you have the ability, then you probably don't! Make sure that your budget can accomodate the loan payments.
3. Constantly monitor your debt level and do not let it get out of hand!
Switch to other loans as one can save a sizeable portion of your interest payments simply by switching to another loan. If an unexpected expense is creating a short-term credit problem, it is possible to juggle one's bills. Current expenses such as rent or housing loan or food must be paid first. Phone and utilities could be delayed.
In cases where the debt could not be settled in a few months, the best approach might be for the borrower to discuss with the creditors. The borrower should settle his problem with the creditors by explaining his circumstances ie why he is overextended and arranging a repayment plan. If the borrower shows sincerity in settling his debt, creditors may go along with the reasonable replayment plan under which they will receive their money, though more slowly. Bankruptcy should be viewed as a last resort until all other avenues have been exhausted.
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