Can You Afford To Repay A Loan?
March 18, 2020
There is a wide variety of loans available depending on your circumstances. Some types of loans will suit you better than others, while others will only be available to certain people. Although the type of loan can vary, the importance of ensuring you can repay on time remains the same – whether you have a personal loan, secured loan, or a loan for a specific purpose e.g debt consolidation.
A loan can help to get you out of difficult situations, but can also land you back in financial trouble if your monthly repayments aren’t affordable and you’re struggling to repay the loan. Although many lenders will perform their own affordability assessments along with checking your credit score, it is paramount that you also know your loan is affordable before agreeing to the repayments.
Working out your budget is important so you know you won’t be straining to make ends meet each month. If you have little to no funds at the end of each month, you cannot afford to borrow money whether you are looking for a short term loan, or a loan over a longer term. If you have a substantial amount of money left, you will then be able to assess how much you can comfortably afford to pay for the term of your loan.
In addition to this, you can then work out how much you’ll have remaining while the loan payment is also being paid. For accurate results, you need to be thorough with your outgoings. Don’t forget the small bills that certainly add up, such as a window cleaner, takeaways and subscriptions.
Once you have ensured that your regular income will cover each of your monthly payments you then need to think ‘worst case scenario’. Be sure that if you became ill or lost your job, your commitments will still be paid. Websites, such as The Money Helper, offer a free Budget Planner tool which may help. Similarly, we have compiled a list of budgeting and finance apps that might be able to help, too.