What's the best way to borrow money?
It’s important to understand that borrowing money in itself isn’t a negative action—but borrowing money without considering how you’re going to clear the debt is.
“If you do need to borrow money, then search around for the cheapest loan with the smallest redemption charges and have a plan for repaying it – not all debt is bad, it is only bad if you can’t repay it and haven’t considered any catastrophe scenarios” says Goodwin.
Before signing on the dotted line, ask yourself those important questions—what will I do if I lose my job? If I fall ill?
For those times when you do need to borrow money, Murphy offers this advice: “A good rule of thumb is to only borrow as much as you need, what you can afford, and for the life of the product you are using. For example, it makes sense to borrow a large amount to buy a car and aim to pay your loan off before you plan to change your car again.”
If you are looking to borrow money more short-term then Murphy advises looking at what 0 percent offers are available on credit cards. But, she adds, “if you are looking to pay off debts over the longer term, then a personal loan or a low rate-for-life credit card may be a better option.” When making major purchases, such as cars or furniture, 0 percent finance deals are sometimes available and are worth taking.
Whenever you borrow, be sure to take the time to understand all the terms and conditions of the finance in advance, and be aware of any penalties you may incur if you miss a payment.