While planning for your financial future, one important factor you should prepare for is financial emergencies. Financial emergencies are an unexpected expense that can happen at any time. A few examples of financial emergencies include medical bills, home repairs, and family emergencies. Although emergencies are inevitable, there are ways that you can mitigate them by knowing how to borrow right.
Here are 5 tips to help you make your borrowing easier, smarter, and better.
1. Avoid borrowing money from friends or family
One rule of thumb when borrowing is to avoid asking any friends or family. While they are often your first line of contact during a financial emergency, borrowing from them could put a strain on your relationship. Hence, you should avoid borrowing from them when possible.
If you need to borrow from close friends or family, you could set it up so that they will be happy to borrow you the funds that you need for your financial emergency. For instance, you could draft up an agreement that is complete with a proper payment plan in place, including how often you will pay and the penalties for failing to follow through with payment. You may also choose to offer a high-value possession as collateral.
2. Consider getting an unsecured personal loan
Unsecured personal loans do not require the borrower to put up any asset as collateral. This makes unsecured personal loans an excellent loan option should you ever find yourself in a situation where you require funds, but don’t have assets to spare. You can seek any personal loan moneylender to guide you through the loan process.
The only limitation to unsecured loans is that they are typically for smaller loan amounts. The limits also differ based on the borrower’s income. However, for urgent needs, personal loans are often already very convenient and accessible.
3. Seek other alternatives instead of borrowing
Borrowing is often the first solution that many think of when they are facing a financial emergency. However, it might not always be the best solution.
You can apply for a second job, look for a side gig, or make money out of your hobby. You can also sell any unwanted or high-value possession that you own to raise funds to tide you through this challenging financial situation.
4. Borrow what you can pay
Before you borrow any funds, you should ensure that you can afford your monthly dues first. This way, you won’t disrupt your financial plan by borrowing too much. You should also never borrow money out of excitement or without planning early.
In general, your total debt should not be more than 20% of your monthly income.
5. Read and understand the fine print
If you are a first-time borrower, or you are unsure of the borrowing terms, then you should read and understand the fine print carefully. A good place to start is with the Moneylender’s Act. You should ask questions if you need to, seek further clarification, or consult a professional. Most importantly, you should be able to fully grasp the loan terms, loan tenure, as well as any penalties in the case of defaulting payment.
Follow the tips above to ensure that you can borrow funds the right way. While borrowing can help you through a tough situation, it is also vital to prepare emergency funds for the future.
If you require a loan to tide you through this challenging financial period, you can seek a licensed moneylender. Our money lender office in Toa payoh is centrally located, offering a convenient way to access low-interest loans to help you pay off your debts and rebuild your financial future.