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Whether you’re buying a car, planning your dream wedding, or getting your first home, it’s tough to fund life’s bigger purchases out of pocket.
At some point or another, you may get a bill that’s just too much to pay for all at once. Loans and lines of credit help you cover those expenses, so you can pay the money back over time.
That’s where responsible borrowing comes into play. It’s the practice of borrowing within your means and ensuring you can afford to take on debt before you do so.
Even for purchases that are essential to your life, it’s important not to bite off more than you can chew. Otherwise, you may struggle to pay back debt that keeps accruing more interest.
A responsible borrowing strategy helps reduce financial risks when taking out a loan or line of credit.
How do you ensure you’re not over-leveraged and are borrowing within your means? Here’s what you need to know about responsible borrowing:
With the right strategy, you can:
Borrowing money within your means is a mix of understanding your financial situation, assessing what you really need, and planning how you’ll pay it back.
Make sure to consider your current and future financial situation before taking on new debt. This will help you ensure you can pay back what you owe.
What purpose does the debt serve in your life? Before you borrow, ask yourself:
When you work with a Cambrian Advisor, we’ll help determine the right decision for your financial situation!
Before you take out a new loan or line of credit, consider the following:
If you borrow beyond your means, consider that other expenses in your life may increase, too. Give yourself a buffer whenever possible, so that you have wiggle room if your budget gets tighter.
If you have a variable interest rate (which is typical for lines of credit), then your loan could become more expensive as rates change. This is something to be mindful of as you’re budgeting.
Some expenses just can’t wait – like car repairs or household appliance breakdowns.
But when money is tight, consider if it’s possible to delay borrowing money until you’re confident you can pay it back.
This is highly dependent on the situation you’re in, but it’s worth discussing with a Cambrian Advisor to talk about your options. Contact us today to set up a meeting.
Not all loans are the same! Depending on what you need to borrow money for, you’ll be better suited for either:
A loan: This is a one-time lump sum of money you receive and pay back overtime, typically with a fixed interest rate.
A line of credit: A revolving source of credit which you can use on an ongoing basis whenever you need funds. It typically has a variable interest rate.
How will you pay back what you owe? Using our Loan Payment Calculator, you can estimate the cost of your loan each month, and how long it’ll take to pay off!
At Cambrian, our advisors are here to provide you with personalized advice based on your unique financial situation. We can help you take out a loan, consolidate debt, and find financial solutions that work for you.
There’s no one-size-fits-all answer for whether a loan or line of credit makes sense for you. We can help you evaluate all the factors that go into your decision. Book a meeting to speak with a Cambrian Advisor today!
We would be happy to discuss your unique situation with you.
Our goal is to make complex topics like this one, simple.
It takes less than 5 minutes to make an appointment or to apply online. It is up to you how you want to meet your advisor - you will have the option to meet your advisor:
