Smart Borrowing: Finding Affordable Loans for Every Need
From student loans to home mortgages, smart borrowing is key to achieving financial goals. Choosing wisely, comparing rates and repayment terms, and planning for the future are all part of a solid lending strategy.
Before taking out a loan, ask
yourself whether the expense is essential and if it will fit within your
budget. Check out our guide for tips on how to borrow responsibly and achieve
your goals!
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Student Loans
Whether your children are going
off to college or you’re considering taking on student loan debt to fund an
advanced degree, it’s important to do the math. Too many borrowers end up with
debt that they cannot afford to repay, which can compromise their future
financial security. A financial advisor can help you find ways to minimize your
borrowing costs by taking a broad look at your family’s entire picture.
The first thing to do is make
sure you’re getting the most out of “free” money — scholarships, grants and
work-study awards before pursuing loans. You may also want to consider a
private student loan with a fixed interest rate, which makes it easier to
predict your monthly payments during repayment. If you do decide to take on a
private student loan, consider working with a co-signer. Be sure to discuss
your expectations for repayment with the co-signer before applying so that both
of you are on the same page about what’s expected of you.
If you do need to take on
additional debt, it’s important to start with federal student loans, which are
based on your financial need as determined by the school using data from the
Free Application for Federal Student Aid (FAFSA). These loans have lower, more
manageable interest rates than private student loans and are available to both
undergraduate and graduate students. Some borrowers can even qualify for
subsidized student loans, where the government pays the interest that accrues
on the loan while you are in school.
After graduation, you’ll begin
making either interest-only or principal-and-interest payments on your student
loans. You can choose to make your payments during a grace period or defer them
for up to six months in case you are unable to work due to unemployment or
military service. You can also borrow for school-related expenses, such as
housing, meals and textbooks. Remember, however, that student loan money should
never be used to pay for a lifestyle that you can’t afford. This can put you at
risk for future credit issues and make it harder to save for other goals such
as buying a home or saving for retirement.
Personal Loans
Personal loans are an affordable
financing option for a wide range of purposes, including home improvement
projects, paying off high-interest debt or investing in a new hobby. These
unsecured loans typically require only basic documentation, such as proof of
income, bank account information and a credit score. They often have lower
fixed rates than credit cards, saving borrowers money in total interest paid
over the life of the loan.
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However, a personal loan can also
come with added fees, such as origination charges or prepayment penalties.
These extra costs can add up quickly and push your borrowing costs higher. To
help keep your personal loan payments within your budget, make sure you compare
rates and fees carefully before applying for a new loan.
Whether you need a loan to
finance a home improvement project or want to consolidate high-interest debt,
it's important to shop around for the best available terms. The best personal
loan offers depend on your creditworthiness and debt-to-income ratio, as well
as other factors like the lender's reputation and customer service. Look for
low rates and flexible repayment options, and choose a lender with a quick and
easy application process.
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Another financing option to
consider is a personal line of credit, which lets you access funds at any time
to cover an unexpected expense or income gap. These revolving loans have
variable rates and can be secured by a banking asset or unsecured, making them
an affordable funding option for many different purposes.
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