Before You Borrow – Questions to Ask Yourself
By Joan Honeycutt
There are many good reasons to borrow money. Most people will take out a mortgage in order to buy a home. Small businesses often borrow money in order to get the business started or to allow an expansion or purchase of needed property or equipment. Farmers may need to borrow money to buy farm implements or additional land, or they may rely on a line of credit or other financing options to handle cash flow issues. Borrowing money is relatively common in our day and age, but it should never be taken lightly. Before you begin the process of applying for a loan, it is a good idea to ask yourself some questions to evaluate your readiness to borrow.
Evaluate Your Reasons for Borrowing
Before borrowing, it is always a good idea to understand the reason behind your decision to borrow money. Are you borrowing in order to invest in a long-term plan, such as an expansion of your business or ag operation? Or on the personal side, are you borrowing in order to facilitate long-term personal or family goals, such as owning a home or going back to school?
Analyze the Effect of Borrowing on Your Overall Financial Position
A related question to ask is whether borrowing will have an overall positive, negative, or neutral effect on your overall financial health. For example, if you borrow money to take some classes that will enable you to get a better job, then you might expect a positive effect on your finances. It is not always clear what kind of effect borrowing will have on your financial picture, but you should always try to analyze your situation and make a reasonable prediction.
Consider Your Responsibility in Repayment
It is easy at the front end of borrowing to only consider your reasons for borrowing. However, repayment is the other side of the matter. You always want to make sure that you have a realistic plan for repayment of your debt. Don’t just borrow the money and hope that you’ll find the money to make your payments. Failure to make prompt repayment according to the terms of your loan can have long-term repercussions on your financial future so you will want to make sure you are prepared to fulfill your responsibility to repay the borrowed money.
The bottom line is that borrowing money is a serious undertaking. You should always make sure that you have determined that it is the right action for your situation. Once you decide that you are ready to move forward, Federated Bank is here to help. We have a variety of loan options for nearly any borrowing need. Our flexible terms and personal service make our loans very attractive to our customers. Come in and talk to one of our loan officers to get started.
