By Vincent A Rogers

Many financial institutions and experts extol the virtues of responsible borrowing. It has become something of a buzzword and, like all terms of its ilk, a great deal of its meaning is often lost in jargon and unnecessary obfuscation. In this article, well not only look at the definition of responsible borrowing but the real-world application of these principles.

In essence, responsible borrowing comes as a result of thorough research of the loan market, a clear reason for seeking finance and an acute awareness of your current (and future) financial status. You should only ever seek to borrow money in situations where it is absolutely essential and you can easily afford to pay it. In any other circumstances, it would be deemed irresponsible to even consider applying.

For instance, you might be planning a wedding in the near future. Not everybody has huge cash reserves or parents who are able to cover the inevitable cost of getting married. This might mean that you have to scale back your plans a little, consider inviting fewer people or choosing cheaper venues and menu choices. However, even the thriftiest brides and grooms can run up a bill in the thousands.

As such, many will look to borrow a certain amount to cover essential costs. This shouldnt be an arbitrary figure though and it isnt a decision that should be rushed either. You should consider how much you can afford to repay and the best possible timeframe. After all, the more you borrow, the more interest you pay. Also, the longer the agreement, the smaller the repayments, but again the interest will increase.

In this case, a responsible way to borrow would be to calculate exactly how much you need, based on budgets and quotes, exploring the loans available to find the best rate and then agreeing terms that you can afford and that have the smallest overall financial cost. This does take a little work and time, but it will mean that you dont end up getting yourself into unnecessary problems as a result of hastiness.

This can be applied to any kind of major loan. So if you need to get a new car or your home is overdue a major overhaul, get your finances in order first and work out what you need, not just what you want.

In many peoples eyes, short term borrowing is by its very definition irresponsible. The high rates of interest, limited checks and reduced lending period would certainly suggest that there is a certain truth in this. However, just as a long-term loan can provide benefit for those seeking large amounts, so short-term alternatives can help anybody who needs just a small amount for a reduced period.

For instance, there are many people who live pretty close to their financial limit often through no fault of their own. If they are in danger of getting overdrawn or missing a payment this can have a devastating long-term impact. Bank charges, interest and late payment fees can quickly accumulate. They will also have the double disadvantage of damaging their credit rating further, making it increasingly difficult to borrow cash in the future.

In this instance, it would be responsible to seek a short-term loan to cover the amount required. Whilst you might pay 20% or more in interest, you would avoid hefty fines and the potential long-term damage that comes with exceeding your agreed limit. As such you could actually save money, especially if you take the time to look around for the best offers.

About the Author: Vincent Rogers is a finance writer who writes for a number of finance businesses. For

payday loans

, he recommends Paydaypower.co.uk

Source:

isnare.com

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