8 Tips to Borrow Responsibly

Life is unpredictable. You can go through life doing everything right – only buying what you need and saving 15% of your paycheck for a rainy day. But then your car breaks down, you lose your job, you have a health scare, and everything you’ve managed to save vanishes within seconds, leaving you in debt. So, in such a situation, what should you do?

Negotiating lending terms

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Suppose you somehow run into a situation where you need to borrow money but are afraid of going into debt. In that case, it does not have to be a terrifying situation. Borrowing prudently and within your means can significantly affect your financial situation.

So in this article, we’ll be giving you a run-down of all the best tips and tricks geared towards borrowing money.

1. Find a Lender with a relaxed credit score policy

A good and stable credit score is mandatory to secure a loan. But, at the same time, there are plenty of other options that could grant you money even if you have a poor credit score. Instant loans are one such example of loans that don’t require a significant credit score.

When deciding whether to approve these loans, many lending facilities worldwide will consider factors other than the borrower’s credit score, such as their employment history and income. For instance, if you live in a country moving towards a cashless economy (such as New Zealand), many financial institutions let you borrow money anytime and anywhere. One great example would be instant loans Nectar NZ, a leading digital lender in the country.

2. Make your case

When you take a loan, you must complete an application, describe your entire financial position, and sometimes even put up collateral. Preparing a brief presentation outlining why they should lend you the money can help the lender see how serious you are about the loan and why you require the funds. Include information such as how you intend to use the funds, how long it will take you to pay back the loan, and how much interest you will pay in return.

3. Establish clear repayment terms

“I’ll pay you when I can” indicates that paying back the loan is not a top priority for you. This is significant because nearly three-quarters of people who borrow from family or friends do not repay the loan. Breaking down exactly how you’ll repay will significantly boost trust in your willingness and ability to make payments.

Include information such as when you will begin making payments, how you will make the payments, and how much you will pay each month. You could also show them your monthly budget if you want to go the extra mile.

4. Sign a contract

The most important thing to do when borrowing money is to document everything – even if you are borrowing from someone you know.

The specifics discussed should be written down and signed before the funds are distributed, and you should both receive a copy of the agreement once it has been signed. If any disputes occur, refer to the loan agreement rather than argue about something you agreed to months or even years ago. Moreover, keeping your financial documents intact will help you manage your money and remain organized.

Borrowing money

5. If you must borrow, borrow the smallest amount possible

Doesn’t it sound ridiculous? Why would you borrow more than necessary? However, once you’ve been endorsed for a line of credit, it’s easy to overspend. This is common with car loans. Numerous people justify their extravagant purchases with the statement, “I can afford the payments.” We’re not saying you shouldn’t drive an $80,000 car, but only if you can afford it in cash. If you borrow money to buy a car, you should never borrow $80,000 when a $35,000 car gets you there just as quickly.

6. Learn about the interest rate and fees

You must understand the fees, interest rates, and payment terms before accepting the money to avoid taking advantage. Payday loans are a prime example of a loan that should be avoided at all costs, owing to their high-interest rates and fees. Here’s an illustration. Assume you expect a $1,300 paycheck in two weeks but require money immediately. A payday lender may be willing to lend you $1,000 today and then take the total $1,300 when you earn your paycheck. That’s $300 in fees and interest, equivalent to a 780% interest rate!

In contrast, the average 30-year mortgage has a rate of around 4.5%. The interest rates on credit cards range from 10% to 25%. In addition, other types of debt, such as tax refund anticipation loans, finance company loans, pawn shop loans, or credit card cash advances, have high fees.

7. Make a financial cushion for yourself

The amount you should save depends on the size of your needs and income, but saving enough money to cover six months of expenses is ideal. Of course, this makes you appear to lenders as a perfect borrower. Still, it also allows you to handle urgent costs without borrowing and lowers your debt-to-income ratio.

8. Make timely payments

Once you begin making loan payments, you must do so on time. Late fees aren’t a fun way to spend money, and poor payment history can negatively affect your credit. Get yourself structured with monthly bill paying. Even better, set up automatic payments; you may even save money on your interest rate. If you choose the latter option, keep track of your bank balance, especially if you have numerous automatic withdrawals. It is easy to overdraft without noticing it.

Also, if you have extra cash, apply it to your loans. It’s not as glamorous as a new vehicle or wardrobe, but it will save you money in the long run. Paying more than the minimum is an excellent way to reduce loan debt quickly.


We hope that now you know how to borrow like a pro and within your means. Only borrowing what you need and making payments timely shows lenders that you are responsible. Then, make sure that you find the right lender and that they work well for you and your budget. Lastly, one of the most important advantages of becoming a responsible borrower is that you’ll be able to provide yourself with better opportunities down the road.


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