Top Strategies For Smart Borrowing

Student loans and the debts are almost impossible to avoid. 90 percent of the students, who apply for financial aid, end up graduating with a student loan debt. There are some ways you can save money on your loans. In this age of credit, borrowing has become a sort of expensive proposition because of the recent economic scenario. The options vary depending on the amount you have to borrow.

Borrowings from the banks include heavy interest burdens, and perhaps credit cards are the worst. Click here to find out more about it. We have written down some smart strategies for borrowing that we often overlook.

1.Mortgage

 

Any lender would want to have collateral while lending as a kind of a guarantee. Mortgaging your property for large loans can help lower the loan risk and the interest rates. When the interest rates are lower, it means repayment and the cost of the loan will be lower.

2.Borrow Against Insurance Policies

 

Insurance policies that are based on endowment are not just future investments, but they are assets that you can use to borrow at the time as well. Most of the insurance companies offer loans against the endowment policies at rates that are reasonable.

Even the banks offer loans at a lower rate against their endowment based insurance policies and at comparatively lower interest rates.

3.Tapping Your Provident Fund

People often forget that they can also avail loans from their provident fund and then make advance withdrawals after a period of 7 years. The terms and conditions could a bit stifling in this case.

4.Loan Against Fixed Deposits

Did you know that you can avail Personal Loans against the fixed deposits instead of breaking them? It is actually made as an overdraft facility, which is why, if you do not pay it by the time your fixed deposit matures, then the amount will simply be adjusted against it. In such a case, there will not be any prepayment penalties or restrictions about the end use of such loans.

5.Borrow From Family Or Community

If you have to borrow for a short time and it is a small amount that you need, you can always ask from your friends and family. A lot for the business communities have established customs where they help people who belong to the same community.

If you are going to have some trouble with the repayments, this is probably the only kind of borrowing where the repayments will be a little lenient.

6.Peer To Peer Lending 

Peer to peer facilities is perhaps the best option for small term loans in today. Some companies offer an open platform which is a kind of a marketplace where customers can interact with potential lenders. It also allows flexibility in the negotiation of the interest rates, the time period of the loan, and the option where you can borrow from various lenders. Such platforms also give you an option of borrowing from different communities.

This, in a way, helps form a traditional route in a modern avatar. In this option, you can get loans for reasons that the conventional institutions will not agree to. You can get these loans at lower rates too.

7.Borrow Less

Before you borrow, it is important that you make a Budget. This way you will have an idea of how much you need, and you will not be borrowing more than that. Borrow less than the salary you are expected to get. You only should borrow what you need instead of borrowing whatever you can because you have to give it back one day.

You should borrow less because every dollar that you get will be doubled by the time you graduate and it will be tough for you to manage them.

8.Scholarships 

First, you should focus on other options with free money such as scholarships, grants, and other types of financial aid that you will not have to earn or repay. Start searching for scholarships that have a free scholarship matching service such as StudentScholarshipSearch.com. You can then earn points to enter your scholarship drawings at ScholarshipPoints.com.

9.Federal Loans And Private Loans

Federal student loans are way cheaper and are also more available. They have better repayment terms as compared to the private student loans federal student loans can offer students income-based repayment, something that private student loans do not offer.

Private student loans are not that ideal so only consider them you have tried all the other financial aid options. Grants and scholarships are the best sources of money you can borrow to pay for college because you don’t have to repay them.

10.Live Wisely

Do not splurge or waste your money. If you decide to live smartly in your school/college years, you will not have a tight budget after you graduate. Cut your college costs and enroll at a college that does not cost that much. An in-state college will be a better option for you. You can also save some money by living with your parents and buying used textbooks.

11.Consolidation 

Manage your credit responsibly so that you can make every payment on time. After a few years of graduation, your credit scores will improve automatically. You can also consider refinancing all your private student loans with the help of a private consolidation loan. Students can easily qualify for a lower interest rate.

12.Automatic Payments

Not many people know, but you can have your student loan payments deducted every month from your bank account. A lot of the lenders offer discounts on the interest rates for people who repay loans through auto-debit. Another advantage will be you never getting late on your payments.

13.Tuition Payment Plan

You can check from your college if it offers a tuition payment plan. Many colleges spread the bill into monthly installments for a fee. These installments are spread over the academic term. With a tuition installment, you will not need to borrow a long-term student loan debt.

With these strategies, smart borrowing will be so much easier.

About the Author:

Taylor Hill works for a financial technology company Stilt located in San Francisco which is revolutionizing the way individuals with limited or zero credit history get loans in the U.S.

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