When Lending Gets Out Of Control
As we grow older, set up our own home, start a family, etc, there will be many times when some form of short / long term funding is required. Many people fall into the trap of borrowing over too short a period, so that "they can pay it back as soon as possible". In many cases this is a false logic as it can place an unwelcome and sometimes unmanageable burden on your overall finances.
The key to controlled borrowing, is planing - plan when your next bonus should be coming, plan when you have some insurance policies maturing, etc. Above all, leave yourself with sufficient to cover your normal everyday expenses after taking off your repayment figures.
The consequences of allowing your lending and repayment habits to spiral out of control can be very stressful and have a major impact on your future credit rating. It is very easy to ignore these for as long as possible, when really we should be addressing and restructuring at the first sign of trouble.
As your situation worsen it is less likely that the banks or other lenders will agree to consolidate your loans. Do not depend on the banks to sit down and help you, very often by the time you approach them you may be past the point of no return. It is up to you to act quickly at the first signs of trouble, and keep a close eye on the shape of your finances.
The consequences of unmanageable debt may result in Individual Voluntary Arrangements or even Bankruptcy, which will be covered in future posts. While for some these two options may be inevitable, the decision should not be taken lightly as they create highly stressful situations. Think long term, do not be in a rush to pay back your borrowings, and above all, ensure that you can actually afford to pay back the money without placing yourself under pressure.
Related Tags: mortgage, loans, debts, lending
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