This issue’s advice from MABS, the Money Advice and Budgeting Service, focusses on a subject that can lead to a lot of anxiety, if not handled properly. Borrowing money has to be handled realistically to be a benefit rather than a long-lasting burden.
Firstly, how to know when is best to borrow? When is borrowing really necessary instead of just convenience and how affordable is it? It’s best to ask yourself how urgent the need for a sum of money is – what are you borrowing for? Could you realistically wait and save it? How long would that take? Most important maybe, do you really need the loan, and if so, do you really need it now?
Ultimately, knowing the right answers is about having a clear sense of your budget over time. Online, www.mabs.ie has an interactive budgeting tool, if you want to begin the work from home.
If you have decided that yes, you do need to take out a loan, you’ll need to work out what type works for you: acquiring a loan is essentially receiving a line of credit with the promise to pay the value back at a later date.
A common type of loan is a Mortgage on a property. The property guarantees the value of the loan, and the loan itself is paid back over a long period. For smaller matters, you can take a Hire Purchase, where you won’t own the object until you’ve paid it off over time (generally less time than a mortgage).
There are also secured personal loans (a loan secured against an asset you already own of some value, like a car or house) or applying for an overdraft on your bank account. These all involve their own risks and professional advice should be sought so you’re clear what you will need to do.
Paying back any loan always involves paying interest on the original amount. Some types of loan, such as money lending firms almost always have very high interest rates, so pick carefully.
Securing a loan always involves paperwork: anyone capable of providing a legal loan will insist on documents of guarantee in your name and theirs.
For more info, see mabs.ie or visit your nearest MABS office.
By Rúairí Conneely
