When people need
to borrow money, they usually focus on how to get the money they need and often
ignore the cost of getting that money. Borrowing money will usually entail
paying for the borrowed money, but that doesn’t mean that saving money while
borrowing isn’t possible. When you do need to borrow money, keep in mind these
ten ways that you can save money when you do borrow:
Don’t Carry Balances
One rule of thumb
for credit card users is to only charge what you know you can pay off. Of
course, everyone has to put some charges on their credit card that they can’t
immediately pay off. But if possible, you should try to pay off your balance
each month. If you don’t, you run the risk of paying outrageous interest fees.
Why would you want to pay more money when you’re already borrowing money?
Find the Best Interest Rates
Before you decide
on any type of loan, look around to see who offers the best interest rates.
Interest rates can be scarily high, so why would you choose a loan that had a
15% rate when you could instead choose one that might have a 7% rate? Always
make sure you have a couple of options so that you can save the most amount
possible when taking out a loan or signing up for a credit card.
Don’t Miss Payments
Missing a payment
usually means you’re paying a late fee. Sometimes these late fees are only $30.
Sometimes they’re 20% of your normal balance. Regardless of how much the late
payment fee is, you’re still wasting money. Instead, save that money by always
paying on time.
For Car Maintenance
If you’re driving
an old or used car that’s constant in need of repairs, you might find that it’s
more cost efficient to buy a new car. New doesn’t necessarily mean it has to be
a recent model, but one that’s in better condition than your old car. Borrowing
money to pay for a better car will save you money. Instead of having to pay
hundreds or thousands every month or so, you can pay for a car that will
instead last you for years.
Home Renovations
The housing market
isn’t exactly booming right now, so borrowing to buy a new home might not be a
great idea. If you’re looking to upgrade the space in your house, borrowing
money to do so could turn into a smart investment. Using that money to add an
extra room or two to your current house will help raise its value. This could
pay off in the future, and the selling point could offset the amount you
borrowed. Also, you’ll probably have to borrow less for a renovation than you
would to buy a new house.
Special Offers
This is a rare
example of how to save money when borrowing. Every once in a while a loan
company or credit card will have a special deal that offers cash back when you
borrow. For instance, a home equity loan company could offer a 2% lower
interest rate than your current loan company if you switch providers. Sometimes
credit card companies will have deals where you spent a certain amount at a
certain store and receive a certain amount back. This method won’t always
happen, but it worth it to keep an eye open for special offers that help you
save money.
Remember That Borrowed Money Isn’t Free
Money
A lot of people
who borrow money tend to forget that it’s not free money. Just because your
line of credit is large, it doesn’t mean you have to spend all that money,
especially if you can’t pay it back. Additionally, don’t fall into the trap of
requesting a loan for more money than you need. Doing this will lead to spending
that money frivolously, which is an utter waste of money.
Don’t Get Conned by Bad Loan Products
Sometimes people
sign up for the quickest and easiest loan, but this often results in them
losing more money. Payday loans or car title loans are high-interest and
short-term loans that are robbing you of your money. These are also loans that
don’t fall under the “good borrowing” practice. They’re useless loans designed
to make you pay twice as much as you would borrowing money from a traditional
loan company.
Refinancing
Sometimes
refinancing is the best option because after renegotiating your current loans
and debt, you can lower the amount you have to pay. This is generally what
homeowners do to manage their mortgage, as it saves them a lot of money in the
long run. It usually means receiving a lower interest rate on your loan, which
is never something you should turn down!
Read the Fine Print
Make sure you read
over every aspect of your loan agreement. Sometimes there are hidden fees and
rules in the fine print. Those hidden fees can range in price, but they’re
usually charged for ridiculous reasons. Don’t get conned into signing up for a
loan that charges fees you don’t need to pay. Chances are that even if you try
to fight these fees, you’ll never get your money back if you’ve already signed
the contract.
