Given today’s economic realities, borrowing funds has become a fact of life for many Canadians. When you need to cover an unexpected expense, a personal loan may provide the solution you need. At the same time, it’s important to borrow responsibly. In this guide, we will explore the steps you can take to ensure that you borrow money in an intelligent and pragmatic manner.
Review your budget
Responsible borrowing begins with knowing your budget. Determine your total monthly income and expenses and decide how much you can afford to repay, given your loan’s terms and conditions. Consider how much money you need, whether you need it now or whether the expense can be postponed, how much you can afford to borrow, and what happens if you miss a payment. This will help you make an informed decision when it comes to borrowing funds.
Keep an eye on your credit score
Depending on the type of borrowing you engage in, a good credit score may be important. If you’re applying for a rental or a mortgage, having the best credit score possible will be an asset. A higher credit score may help you obtain more favourable terms on a loan. Therefore, if at all possible, strive to improve your credit score. Check out the article “7 Smart Tips to Improve Your Credit Score” to discover possible ways to do just that. To monitor your credit score and catch any errors on your credit report, sign up for Credit Verify. It only takes a few minutes and will help you stay on top of your goals. Here at OntarioCASH, we don’t check your credit score during our quick and easy online application process! It’s never been easier to obtain a personal loan in Ontario.
Know how to differentiate good debt and bad debt
A good debt is an investment that typically increases one’s income or wealth in the long term, such as a student loan intended to help you get a higher-paying job or a loan for home renovations that may increase your home’s value.
A bad debt involves spending more than you can afford on immediate pleasures that have no long-term benefit, such as a holiday or an expensive pair of shoes.
It’s important to distinguish between good debt and bad debt when it comes to your borrowing decisions. As the name implies, you want to eschew bad debt and strategically acquire good debt, provided that you have the ability to repay it and provided that it is the best way to achieve your long-term financial goals.
Understand the difference between a fixed interest rate and a variable interest rate
Most personal loans come with a fixed interest rate that will not change throughout the course of the loan repayment. Some loans, such as a variable-rate mortgage, may come with a variable interest rate. When the Bank of Canada raises the benchmark interest rate in an effort to curb inflation, the variable interest rates associated with your mortgage, for example, may rise, making your payments more expensive. Therefore, if you do take out a variable-rate loan, it’s important to factor possible interest rates hikes into your repayment capability. Fixed-interest rate loans, such as most personal loans, offer an easier way to calculate your repayment obligations.
Review your loan agreement carefully
It’s always crucially important to review your loan agreement. Understanding your loan terms and conditions is an important step in borrowing responsibly. By understanding the cost of the loan, including fees and the interest rate, as well as possible consequences for late payments or missed payments, you will be in the best position to assess your ability to repay.
Create a repayment plan
Once you’re clear on your budget and how much you can afford to pay, establish a loan repayment plan. Set aside a certain amount of money each month to make your regular payments, ensure that you’re able to make your payments on time, and determine the important due dates and the time by which you need to repay the loan in full. Being proactive in tackling your loan repayment will likely facilitate the best outcome.
Build an emergency fund
An important step to achieving financial stability is building an emergency fund. If you’re able to set aside even a small amount of money each month, it will gradually accumulate. Ideally, you would aim to have at least three to six months’ worth of expenses saved up in case of emergencies e.g. a job loss. Then, when you encounter a situation such as urgent car repairs or a medical bill, you will be able to cover the expense without experiencing as much stress. Building an emergency fund is important for anyone seeking greater financial peace of mind.
Avoid the debt cycle
The key to sidestepping the debt cycle is only borrowing what you can afford. Taking out too many loans simultaneously or overspending on your credit cards can lead to a debt cycle that may be difficult to escape. Therefore, only take out loans you need to cover expenses that you cannot avoid or that benefit you in the long run. Use online budgeting tools to allocate appropriate amounts of money to different financial goals. Look for ways to increase your income and pay down your debts. Given today’s plethora of online resources, it’s never been easier to upgrade your professional skills and start earning more money. There’s also never been greater access to budgeting tools and methodologies. If you need information about a given career or educational path, for instance, consider doing a quick AI search. AI technology may provide a quick overview of any given subject, but make sure you double-check any information you discover with an AI search. AI tools may at times provide inconsistent statistics and inaccurate data. Check the original sources.
Protect your personal information
In the digital age, keeping your personal information secure should be one of your top priorities. You need to be able to differentiate reputable lenders from scam artists. You can check the reputation of a lender via online resources such as customer reviews. You can check the lender’s website, which should look professional and provide accurate contact information. You also need to check whether the lender has a license to operate in Ontario.
Here at OntarioCASH, we employ secure encryption technology to help safeguard your personal information. If you apply, we will only connect you with reputable lenders across Ontario.
Conclusion
It is important to borrow money responsibly. Keeping the above points in mind will help you navigate the lending and borrowing landscape in Ontario successfully. When you need to pay for an immediate expense like car repairs or an unexpected bill, a personal loan from OntarioCASH may provide the funds you need. Apply online today. We don’t check your credit score or credit report during our simple and convenient online application process. It only takes a few minutes.
