There is an old phrase of ‘neither a borrower or a lender be’ which many people may have heard their grandparents saying. It is a rule that many people lived by but it has unfortunately made many people scared of debt. It implies that you should never lend or borrow if you want to be happy. Following these rules may seem sensible but actually are not at all practical for modern life for a whole lot of reasons.
Lending money is something most of do all of the time without even realising it. When we put money in the bank, we are effectively giving it to the bank so that they can lend it out to others. However, there is very little risk in this type of lending. Some people invest money in peer to peer lending and so do directly lend money that way. Some people lend money to family and friends.
It is probably this last type of lending which the old proverb refers to and it can be problematic. Lending to friends or family members can have an impact on your relationships with them. It can lead to you having disagreements about repayments. It may even cause you to fall out completely. It could also lead to problems with your relationships with other family members who might get jealous about you borrowing money and them not having any. Particularly if they ask to borrow money and there is none left for them as they have had it all. However, there are also advantages to lending this way as it could improve relationships and enable your friends and family to improve themselves so you will need to give it a lot of thought.
Borrowing money is something that many people do these days. If you want to buy a house or go to university, chances are that you will need to borrow money in order to do so. This means that by not borrowing money, you could actually be holding yourself back in life. It is something that many people do not really understand.
It is easy to panic when you think about borrowing; to worry about getting into unmanageable debt and to not be able to cope with it. Obviously this does happen to some people and it is something you need to be wary of but it is not something that will necessarily happen to everyone. There are certain steps that you need to take when taking out a loan which will help you to protect yourself against this. You need to make sure that you really need the loan, that you are only borrowing the amount that you need, compare lenders to get the best deal for you, ensure you can afford the repayments and do not look at it as an excuse to borrow more and more money without good reason. Many people manage debt really well and it allows them to improve their lives by being able to own a home rather than rent, which can often turn out to be cheaper and to get an education in order to be able to earn more money in the future.
There are other types of debt which can be beneficial as well. Maybe your car has broken down and cannot be repaired and you need one for work. If you have no savings then you will have to borrow the money to buy one. As long as you make sure that you get the best loan for you, do not borrow more than you need and ensure you can afford the repayments, then you could end up with a car which will allow to keep your job and be able to manage the loan.
There are also some loans which are not worth having. Such as, if you want to borrow money to buy things that you can do without, could not afford the repayments and do not research properly to see if there are cheaper options. Loans are sold to us in the same way as other goods and they can seem like a normal thing to regularly use to pay for day to day things, but it is wise to think hard and only use them when necessary.
Therefore we should not avoid all borrowing and lending but just think very carefully about it. We need to make sure that what we are doing will help us to improve our situation, will not cause us financial problems and that we are not paying more than necessary. It is worth spending a lot of time researching and thinking before borrowing or lending any money, but it could lead to a positive outcome if we do it. Think carefully about the benefits both long and short term as well as the risks and this should enable you to be able to make a sensible decision. Never go into it without doing this as it is more likely that you will make a decision that you will regret if you do.
If you need an urgent car repair, then you may need to borrow the money to be able to get it fixed. It could be that you feel a pay day loan will be your only option. Although this could be the right option for you, it is worth looking at all of the other options first so that you can be sure that you are making the right decision.
If you have any money saved up, then it is best to use this rather than borrowing. This is because you will end up paying far less for the repair. If you borrow money to pay for something then you will usually have to pay interest and possibly fees as well, in order to cover the costs of the loan. It can be hard using savings, particularly if you are saving up for a specific thing or like to know that you have some money for emergencies. However, this is the sort of emergency that you should be using savings for. The cost of a loan can be very high, much more than any lost interest on savings. If you are saving up for something, then you will be able to save up for it again once you have paid for the car repair and you will be much better off financially this way.
An overdraft can be a convenient way to borrow money. Most of us will have access to one with our current account and therefore if we withdraw cash or pay on a debit card and use more money than is in the account we will use it. Although convenient, an overdraft can be very expensive. You will start being charged immediately and if you go beyond your arranged overdraft limit, you can actually end up paying more in charges and interest than on any other type of loan. This does depending on your banks charges of course, but it is still likely that there will be cheaper options available.
The great thing about a credit card is that you do not have to repay what you owe immediately. This means that you can use it to make a purchase and then wait a good few weeks before the bill comes in and you have to pay. You can even organise for the bills to be paid just after you are paid so that you know that you will have the money available to pay it. The pitfall of a credit card is if you only repay the minimum each month. This will usually be just enough to cover the interest and a little more. If you continue to spend on the card and only repay the minimum you could end up paying a large amount of fees for it. It is much better to repay the full balance or as much as you can each month so that the debt does not build up and you will not have to pay so much in interest charges. Be sure to repay the minimum too or else you will end up having even higher charges to pay.
A payday loan is an option often used by those with a poor credit record that do not have access to overdrafts or credit cards or that have already used up their available credit on those. It is a quick way to get money but it can be expensive and risky so you do need to be careful. As with all loans it is really important to make sure that you can afford to repay it. A payday loan often has to be repaid in one lump sum, but a direct debit is set up just after you are paid so that there will be enough money available to do this and no chance of you forgetting to do it. These loans can be expensive though and if you do not make the repayment then there will be extra fees, as they would with any loan. These can add up quite quickly with this sort of loan.
So whether a payday loan is right for you will depend on what other types of credit you have available to you. It is important to make sure that you calculate the costs of the different types of loans as well as the risks and see which you think will be the cheapest for you. Then you need to compare the different lenders to see which has the cheapest option for you. This will be quite a bit of work but it will be worth it when you get the best deal. You could save a significant amount of money by choosing the right way to pay for your car repair and making sure that you repay it on time.