When Is the Right Time to Apply for a Loan?

Medical bills, tuition fee of kids, unpaid bills with past due notices – these are some of the many instances that forces you to borrow money in order to pay for these expenses. By borrowing money, this could mean borrowing from friends or family or getting a loan from the bank, whichever is applicable.

Here’s the thing: there are instances when you might not need to borrow money from banks or your family.

Check out these guidelines or instances on when is the right time to get a loan. 

1) Repay a loan with higher interest

As a rule, borrowing money to pay off your already borrowed money is a big no-no. On the other hand, there are instances when you are allowed to get a loan to pay for your existing debts.

If your existing loan has higher interest rate, then look for a loan with lower interest rate. In doing so, you will be able to save more on interest, thereby increasing your chances of repayment. This could get an instant boost in your credit score as well.

Tip: Consider debt consolidation. This means all of the loans are under one unified loan with one interest rate and one due date. This will make it easier for you to manage debts.

2) Getting a higher education

You can’t be an OFW forever and that’s okay. If you plan to pursue higher education or get further studies, then getting a loan is fine.

It’s not just any other loan. Apply for a salary loan so it will be easier for you to pay for the loan while getting a career boost.

3) Established cash flow every month

Time and again, we always emphasized the importance of growing your money through various investments. After all, you can’t work overseas forever. This is why it is imperative that you start growing your money so you will have a stable cash flow in case something happens, say sudden termination of employment or accidents.

Once you have an established cash flow, that’s the time that getting a loan is advisable. Keep in mind that lenders look closely at your ability to pay, whether in the form of monthly salary or any other modes of cash income. If you are able to prove that you can pay your loan, then there is a higher chance of approval.

On the other hand, there are cases when getting a loan is not advisable. These instances include:

•  Travel money – Going somewhere with the family can be exciting. Still, borrowing money to be able to pay for your travel expenses is not advisable. If you plan to pay for your travel expenses by getting a loan, then it is best not to get a loan and save up for that instead.
• Buying material things – Want a new phone or a tablet but you have not enough funds to finance for it? Then save up for it instead of getting a loan. Borrowing money to buy goods, especially something that won’t last is not recommended.

Lenders like Balikbayad will always be there to help you with your cash needs. Still, keep in mind that they consider a lot of factors before you get that loan approval. Avoid borrowing money just to get out of your current situation. Loans will always be loans and any unpaid loans can take a toll in your credit score.