Advice

The Best Times to Borrow Money

If you are considering getting a loan, then you may wonder whether it is a good time to borrow money. There are many factors that you should consider when borrowing and some of these may be linked to getting the timing right.

Good timing can mean that you borrow when the economy is in the right state as well as when the time is right for you and it is worth knowing when this time is so that you can make sure you are making a sensible decision. As a mortgage is a long term commitment of normally twenty five years, the current state of the economy may not make a huge difference, whereas a short term loan may not be so effected, although it may be cheaper to delay and get one later if you think interest rates will fall in the future. However, predicting what may happen in the future could make a difference, but is hard to do. If interest rates are low, then chances are that they will rise and mortgage repayments will go up. If rates are high then they may fall and repayments go down. Uncertainty in the economy, can sometimes have an effect on salaries, prices and things like that, which will have an effect on how well you can afford your mortgage repayments. Big economy changes such as leaving the EU, changes of government economic policy, world recessions and other world economic changes can also be a factor and some are more predictable than others.

It is easier to look at your personal circumstances to work out whether the time is right to borrow. You will need to start by making sure that you will be able to afford the repayments at the moment. It is important that you do not guess but that you actually consider how much money you have at the end of each month and whether that is enough to cover the repayments. Make sure that you actually calculate what you income is and how much you spend and see how much is left; working out whether that will be enough to cover the repayments. Do not just look at the last few months, but think about whether there are any months which are extra expensive, perhaps when you have insurance to pay, gifts to buy or things like that. You may be able to manage if you save money towards these things, but you will need to be organised and put a plan in place to ensure that you are prepared.

It is also important to imagine what may happen in the future with regards to your income and your expenditure. Think about whether you might get a reduction in income, perhaps losing your job, having to give up work or losing the income from other household members. This could have a huge impact on your ability to make the repayments. If you have some savings to fall back on, this could help but they will not last long and whether that will be enough will depend on how much you owe and how long you have a reduced income. Your spending may go up if you have significant life changes, perhaps if you have children, move to a larger home, move in with a partner, become a full time carer or whatever. This will not be significant for a short term loan but could have a massive effect on a long term loan.

So it is very important to make sure that it is the right time to borrow. Your personal circumstances are easier to predict than the general economy and so it is worth considering whether things may happen which will affect your chances of being able to make the repayments on your loan. The longer the term on the loan, the more likely things could have an impact on your repayment ability. It is worth making sure that you are confident that you will be able to make all of the required repayments without it having a significant impact on your life. Missing repayments can not only be stressful and expensive but it could mean that anything that you use as collateral, such as a car or home could be taking by the lender and sold or they could take you to court for the money.

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