Are you in trouble financially? Borrowing money is the right solution to overcome this problem, but it should not be done at random. As a debtor, you must be able to predict the right time to apply for a loan to a creditor.
In addition to reducing the potential for default, borrowing at the right time allows you to maximize your loan. So, when should you borrow money from a lender? Check out the answer below. It is also important to manage your Student Loan Debt
1. When Unable to Meet Basic Needs
Principal means the main, where the fulfillment should not be delayed because it can be fatal. If the fulfillment of basic needs is threatened because they do not have money, then it is legal to apply for a loan. As for the loan amount, it should be adjusted to the average cost you spend to meet your daily needs.
To find out the nominal, you can make an estimate of expenses. After that, multiply by the number of days left before payday arrives.
For example, spending in 1 day is $100,000, while the new payday will arrive in 2 weeks. That means, you can only borrow $100,000 x 14 days which is $1.4 million.
2. When Business Goes Down
For those who run a business and happen to experience setbacks, borrowing money is the best step to maintain the smooth running of the business. The loan received is at least able to save the business from the shadow of bankruptcy that has been haunting your life.
It takes a large enough loan to restore business performance as before. You need capital to create new products, buy raw materials, increase the number of employees, improve services, and intensify promotions.
Maximize existing capital to restore business glory as before. When the business is victorious again, then you can use some of the profits to pay off all loans.
3. Want t o Do Business Expansion
In addition to financing a declining business, loans are also needed when the business is progressing. Yes, you need some funds to finance business expansion. For example, you want to enlarge the building at the head office, open new branches in several cities at once, increase the number of employees, establish cooperation with media partners, and improve production quality.
The proposed loan can be used as capital to cover various expenses incurred during the expansion process, without having to interfere with business or personal finances.
But, you need to be careful and careful to calculate the interest rate because the loan submitted is not small. Don’t hesitate to compare loans from several lenders to choose the best one as business capital.
4. Being Sick
No one wants to be sick, but what if this unfortunate event happened to you or your family? Assume that you have an emergency fund to cover medical expenses. However, whether the funds are enough to pay for treatment until healed?
Like it or not, like it or not, borrowing still has to be done in order to save a life. Make this a warning to take better care of your health to minimize the risk of getting sick.
On the other hand, this event is also a lesson that makes you aware of the importance of an emergency fund. So you need to increase the percentage of the budget for the emergency fund. If so far it is only 10% of net salary, now try to increase it to 15% every month.
5. Trapped in Debt in the Past
Even though the period has passed, past debts will still affect your financial condition today. If the debt has not been paid off, then pay it off before the debts accumulate and are difficult to pay.
You can borrow money from other lenders, especially if the lender still gives you the opportunity to borrow. Try not to repay the debt beforehand, but pay it in full. Especially if the interest rate set by the creditor is now lower than the previous creditor.
6. Buying something as an investment
Well, if the purpose of borrowing money is to invest like buying a house, then this is still acceptable. Moreover, house prices will continue to increase every year, so you don’t feel at all a loss when borrowing money.
But if the money is used to buy a car, it’s better not to apply for a loan. As you know, the value of the car will continue to depreciate. So it will be a loss if you invest money in this one asset.
House prices are indeed expensive, so the loan must be large. However, this loan will return on investment when the house is sold. Or it will even be profitable if the house is sold at the right time.
Make Sure Your Credit History Is Clean, Yes!
Before applying for a loan, first make sure that your credit history is clean. In a sense, free of bad credit, free of fines, and default. In this way, it will be easier for any creditor to approve a loan application.