4 things you should ask yourself before taking out a loan or hire purchase

Taking out a loan, or adding to the mortgage, can sure be tempting. And we’re not here to crush your dreams – quite the opposite.

So before you take out debt, here’s how to be a financial adult and make sure it’s a good decision…

4 things to ask yourself:

1. Is this a want or a need?

2. Am I trying to have champagne on a beer budget (am I living outside of what I can afford)?

3. Instead of going into debt right now, do I have other options? i.e.:

  • Can I wait and save up for it instead (saving me money on interest & fees)?
  • Can I borrow the money more cheaply somewhere else?
  • Can I buy it second-hand or make a compromise, until I can actually afford a bigger/better one?
  • Can I talk to a financial adviser to explore getting more money out of my existing financial situation, and create a debt & savings plan to really start “adulting”?

4. What is the debt really costing me? Think about:

  • Will I have to put anything up for collateral (such as my car, which means I can’t sell the car without the financier’s permission, or ask someone else to guarantor for me, putting them at risk if I somehow can’t repay)?
  • Will I have less flexibility in my weekly budget to do the things I love?
  • Can I manage the repayments (both now and for the next several months/years until the debt is repaid)?
  • Do I know what the fees are?
  • Do I know how much interest I’ll be paying for this?
  • Will I have to give up any of my other big picture goals because of this? (think travel, home ownership, having kids, retiring at 45!)
  • Will my family miss out on something important if I do this?
  • Have I read the fine-print before signing? (remember, it is your right as a consumer to ask as many questions of the finance company as you like – they are legally required to make sure you know what you are signing up for)

Ultimately, the decision is yours and only you can know what is right for you. 

We are here to help though. At any stage we are here to help guide you and put everything into a big-picture perspective – just get in touch

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