Borrowing money can be a necessary step in the journey of #adulting that could allow you to achieve bigger financial milestones down the road. But if you aren’t careful, this option can also lead to big problems.
Now that you are in the game of borrowing money, check out these tips to avoid common downfalls and feel empowered.
1. Don’t charge too much to your credit card.
Part of #adulting is learning how to check your impulses. Credit cards can be great for emergencies but be cautious when spending big on items for pleasure. Challenge yourself to take a pause before you add those cute new boots to your online shopping cart or order takeout for the third time this week. Although having a credit card can feel like having free money, it’s really not. If you need help keeping your spending in check, consider downloading the Summit Climbr app to track your spending and progress toward your goals. It’s like a vibe check for your finances!
2. Keep tabs on your credit score.
Did you know that managing your loans (like an auto, personal or credit card) can have a big impact on your credit? The cool thing is, if you do it correctly you can actually build up your credit reputation. Achieving a high credit score can increase your chances to qualify for other loans down the road! Another bonus is that other businesses could offer you lower rates if you have good credit. It’s a win-win! To maintain a good credit score, pay off your full balance each month whenever possible and avoid racking up credit card debt. This is one of the quickest ways to lose control.
3. Use the terms of your loan to your advantage.
Different loan types have different rewards, penalties and payment schedules. Make sure you fully understand the nitty gritty terms of your new loan or credit card to avoid unnecessary consequences like prepayment and late payment penalties. No one likes those, so it’s best to just avoid them. You can also use your unique payment schedule to your advantage! For example, fixed rate loans work great for budgeting because the payments stay the same from month to month. Consider what monthly payment you can afford at this time and stick to it. And when you do carry debt, make sure that you’re getting the best rates possible,
Remember, you are borrowing this money for a good reason. Use it to support your needs and dreams FIRST, then focus on paying it off – for the win!
4. Keep your eye out for refinance opportunities.
You may feel extremely confident with your loan. That’s good! You did your research and you know that you got the best rate possible, which is fantastic! But it’s important to make sure you keep yourself open to new information. There may come a time on your money borrowing journey where you find yourself with too many different payments and interest rates to keep track of. If it does, it’s a great time to look into consolidating your loans into one place. Get control and get back on top. That’s what owning your finances is all about. There will also be times where you come across loan opportunities that will offer you a better interest rate. If so, don’t be afraid to refinance.
Choosing to take out your first loan has opened you up to a world of exciting possibility and with that comes new responsibility. Stay alert and educated, though, and you will set yourself up for financial success throughout your life. You got this!
Questions? Schedule an appointment and a Summit financial expert can guide you through it.