Borrowing from a money lender Singapore requires much planning and consideration so you can maximise the money you borrowed. If not, you will end up wasting the money and running out of funds suddenly. The last thing you want is to need to take out another loan to cover the deficit.
Thankfully, there are ways to avoid this. Before you decide to take out a loan, plan ahead. Do these four things so you can use your first loan proceeds wisely.
Identify your purpose for the loan
Before you even decide to take out a loan, you should know what you intend to use the money for. Whether it’s for medical bills, home renovation, car repairs, education, or whatever purpose, you should have that identified beforehand.
This way, you know exactly where to spend the money you will borrow. Additionally, it’s easier to avoid overborrowing this way.
Do not spend any surplus unnecessarily
Sometimes, you may overestimate the money you need to borrow. If you have some excess cash from the loan after you’ve used it for your intended purpose, don’t spend it on other things.
Instead, use that money as additional funds to pay back the loan. This way, you can pay off the loan faster and pay less in interest. This is also the best way to not run out of funds in case something comes up.
Avoid excessive borrowing
It’s always tempting to borrow in excess of what you need, especially with lenders marketing their “favourable” loan terms all the time.
But excessive borrowing will only increase your burden of debt. You will end up having to pay more not just in principal but also in interest as well as any extra charges. This is risky, as you may end up not having enough money to pay off your loan.
Instead, identify the exact amount that you need and only borrow that much. If you want to be sure, borrow just a little over that amount so you have a buffer. This way, you can pay off your loan more easily, and you won’t strain your finances.
Spend only on needs, not wants
Make sure that you only borrow money to spend on your needs. Avoid spending any loan proceeds on wants. This is the easiest way to run out of money unexpectedly. If you focus on your needs, you’ll be able to maximise every dollar you borrowed.
It’s also not quite a good idea to use loans for wants, as these things are usually liabilities. In other words, they decrease in value over time, and they do not earn you any money. With that, you end up with less money and a debt to pay on top of it.
Conclusion
Once you have received the money from your loan, make sure to spend it wisely. Use it only for your intended purpose, focusing on the things you need. If you have money left over, use that as additional funds for repaying your loan. This way, you can get out of debt sooner and spend less money on interest and charges.