10 Ways To Save Money When Borrowing Money

 

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.

(Photo courtesy of quaziefoto)