Borrowing money is a part of almost everyone's financial life. Mortgages, auto loans, and college loans enable us to afford things that are beyond our current financial reach. Credit cards provide convenience in our daily lives that many find essential. But borrowing money also carries serious responsibilities, and too much borrowing or the wrong type of borrowing can cause many problems.
Before applying for a loan or a credit card, here are some things to consider:
- Why are you borrowing? Borrowing for things that provide long-term and lasting value should come before borrowing for things that provide only momentary or limited enjoyment. It is much easier to justify borrowing for a home or a college education than borrowing for a great vacation or a great outfit you may only wear occasionally.
- Do you understand your responsibilities? Remember any money you borrow must be repaid along with interest. Be sure you can afford the payments the borrowing will require. Also, spend some time to find the loan with an interest rate and terms that best fits your situation.
Before sitting down to fill out a loan application or arranging a meeting with a loan or mortgage officer, here are some items you may want to have handy:
- Your credit report. Most lenders will automatically order a credit report, and you should know what it contains. Some websites enable you to receive a credit report once a year and you can do this by going to annualcreditreport.com. Otherwise, for a small fee, you can order your credit report from the three large credit reporting agencies by calling them: