Borrowing money can be a necessary step in transitioning into adulthood that could help you to achieve bigger financial milestones down the road. But if you’re not careful, borrowing money can lead to big problems.
Check out these tips to avoid common downfalls when it comes to borrowing and feeling empowered.
Don’t Charge Too Much on Your Credit Card
Part of transitioning into adulthood is learning how to curb your impulses. Credit Cards can be great for emergencies but be cautious when spending on items for pleasure. Challenge yourself and take a pause before you add those new shoes to your online shopping cart or order take out for the third time this week. Having a credit card can feel like you have free money, but it's really not.
Keep Tabs on Your Credit Score
Managing your loans like auto, personal or credit cards can have a big impact on your credit. If you do it correctly you can build up your credit reputation. Achieving a high credit score can increase your chances to qualify for other loans in the future along with qualifying for lower rates. To maintain a good credit score, pay off your balance in full each month whenever possible and avoid racking up credit card debt – this is one of the quickest ways to lose control.
Use the Terms of Your Loan to Your Advantage
Different loans have different rewards, penalties and payment schedules. Make sure you fully understand the terms of your new loan or credit card to avoid unnecessary consequences like prepayment and late payment penalties. You can also use your unique payment schedule to your advantage. For example, fixed rate loans work great for budgeting because the payments stay the same each month. Decide what monthly payment you can afford and stick to it. When you do carry debt make sure you are getting the best rates possible.
Take Advantage of Consolidation and Refinance Opportunities
It’s important to make sure you keep yourself open to new information no matter how confident you are in your loan. There may come a time where you find yourself with too many different payments and interest rates to keep track of during your money borrowing journey. If this occurs, it’s a great time to consider consolidating your loans into one place. A time will come when you come across a loan opportunity that will offer a better interest rate, when this happens don’t be afraid to refinance. Gain control and get back on top of your finances.
Taking out your first loan opens you up to a world of exciting possibilities that come with new responsibilities. Stay alert and stay educated to set yourself up for financial success throughout your life!
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