How much should I borrow?
Many people look at secured loans and see the potential they offer. With a secured loan, you can cover any expense, whether it is school payments, home repairs, loan consolidation or even the vacation you've always wanted.
You only want to get a secured loan once, so many people wonder exactly how much they should borrow in order to cover everything they may want a secured loan for.
When deciding how much you want to borrow, you should start out by using a budget calculator to see what kind of payments you can even afford, which is very important when picking out a loan. The amount of money you can afford to pay per month, along with the length of the loan and the interest will greatly affect your choices.
Remember, however, that when you find out that you can afford to pay, for example £300 per month for your secured loan monthly payments that does not mean that you should get a loan that has a monthly payment equal to the full amount you can afford to pay. Rather, you should get a loan that has monthly payments that still allow you to save money in case of emergencies or to pay back your loan payments even if you have unexpected expenses.
The general rule of thumb is to never borrow more than you need. For example, when taking out a secured loan for the purposes of loan consolidation, you really only want to get a loan that is the amount of the debts you are consolidating.
Similarly, if you are taking out a loan to pay for a car, you would want to take out a loan equal to your car payment.
However, there are a few exceptions. First, if you foresee there may be a few extra expenses you have coming up in the future, you may want to take some additional loan money and keep it in the bank just in case those expenses occur, that way you do not have to take out another loan which is terrible for your credit rating.
Also, sometimes you may simply want to treat yourself to something nice. Maybe you want to go on a vacation because you have used the loan to pay for a medical expense and you are finally feeling better and want to spend a week in the Bahamas to celebrate. This is a good and understandable reason to get more than your loan amount, though you should only do this if you can afford to make the monthly payments and the difference will cause absolutely no problems in the future.