I have the rare pleasure of saying that I am debt free. No school debt. No car loans. No mortgage (but I don’t own a home). Nothing. Zilch. Nada. Many people think this is impossible, but I have proven all of them wrong. Becoming debt free is not an easy feat, but it is far from impossible. I could go on and on about strategies and life habits to assist in getting there and maintaining this elite status, but I’ll save that for another day.
Even though I am debt free, I’m not entirely against using debt to your advantage. But, there is a huge difference between using debt to enable bad habits and using debt to leverage your money. If you are looking to take out a loan, there are a number of things you should consider first.
Vendor
If I asked you the first place you would look to obtain a loan, odds are that most of you would look at your local bank first. That’s not a bad thing at all. You should start where you are comfortable. But, you shouldn’t limit your search there without looking elsewhere. You need and must look at all of your options. You can even get loans online, for example: http://www.cbonline.co.uk/
Interest Rate
Another important element in any search for a loan is the interest rate. This will determine not only how much money you will have to pay, but also how hard it will be to pay off the loan. When you are shopping for different loans and/or vendors, you should pay attention to the interest rate first and foremost. While 1% or 2% may not seem like that big of a deal, it can make a huge difference in the long run.
Length
Another factor in determining your monthly payment will be the length of the loan. Most financial bloggers will advocate on getting the shortest loan possible, but this is far from the truth. The reality is that you need to get a loan that fits your financial situation and priorities. Getting a loan that requires you to pay it off too quickly will become a huge burden and getting a loan that requires you to pay it off too slowly will end up costing you extra money. Depending on the situation, it can cost you precious dollars or stress points.
While there are a number of other important elements to take into consideration when getting a loan, the most important piece of advice that I can give is to do your homework. If you jump into something too quickly without doing the due diligence, you will absolutely regret it. Not only will this mean a huge headache, but it could create a larger financial challenge than the one you are trying to solve.