Staying on top of your borrowing

From time to time most people need to borrow. The key to long term success is to keep borrowing under control. That involves having a good grasp on what is coming in and out of the household in terms of your finances. We want to show you the positive types of borrowing, as well as help you look out for the tell tale signs that your borrowing is getting out of control.

Positive borrowing

Borrowing isn’t always a bad thing, far from it. In fact, borrowing for most people is a fact of life. From student loans, to mortgages, to car finance, they can all be considered positive borrowing. Buying a house with a mortgage is generally considered a sensible thing to do. If you need to borrow to pay for a car, if the payments are manageable this can be a good idea as it can be essential to bringing in an income. Taking a student loan can get you a degree or qualifications that can considerably boost your earning potential.

What you shouldn’t be borrowing for

The golden rule here is you shouldn’t be borrowing for non-essential spending. That is sometimes easier said than done. The kind of things you tend to borrow for are far more exciting. Things such as the latest smartphone, holidays, cameras, and clothes. In the days of Instagram influencers, Buy Now Pay Later loans such as Klarna, and digital advertising, it’s hard to avoid the temptation of instantly receiving the things that you want.

Taking out further credit

If you’ve decided you’re going to take out more credit, before you do, you need to do some calculations with a budget calculator. You should enter your new repayment amount for the credit you’re borrowing and work out if your household budget can handle the new expense.

Signs that your borrowing is out of control

• You need credit to see you through to the end of the month – this might be the most obvious, but sometimes it’s a question of being brutally honest with yourself. If you’re consistently using credit to make ends meet it’s usually a strong signal your finances need a health check.
• You’ve made late payments – late payments damage your credit score and can lead to a default notice which stays on your credit file for six years.
• Borrowing money to pay back your debts – this could also tie into the first point. If you’re borrowing money to pay back existing debts you could be compounding your problems.
• You’ve spent your savings – much like needing to borrow at the end of the month, if you’re eating into your savings it’s a sign you have more going out of the household each month than coming in.

In all of these cases and others it might be worth considering speaking to a debt expert. This might enable you to get your finances under control without getting into more debt.