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Sort Out Your Family Finances: Borrowing money

by Bob Reeves

Attitudes to borrowing money have changed over the years. It is virtually impossible to go through life without having to borrow money. For example, most of us need a mortgage to be able to buy a house. Other ‘large ticket’ items such as cars might only be accessible with the aid of a loan.

The key to borrowing is to make sure that you can afford to repayments now and in the future. Many people have been caught out borrowing money when interest rates are low only to find they cannot afford the repayments when interest rates rise again. At the time of writing interest rates are at an all time low so there is only one way they can go which is up. Unless you get a fixed rate, you can expect your repayments to go up in the near future.

Another key factor when borrowing money is to take on the right kind of borrowing. For example, if you are borrowing money to buy a car and you expect to repay over five years, then a personal loan is probably the best bet. If you need a few hundred quid to see you over until pay day, then an overdraft may be more suitable.

The key thing to avoid is borrowing money to fund a lifestyle that you cannot afford. If you are borrowing money just to live, then you may be heading towards debt crisis.


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