If you don’t remember that really great party you went to, the chances are you do remember the hangover. But what could be worse than a ‘loan hangover’?  Receiving the cash might have been fun, but if you wake up wondering how you seem to have taken out a loan that costs more than a designer handbag, then you won’t be feeling great.

So to avoid that ‘morning after the night before’ feeling, I’ve put together a simple guide about how to borrow wisely.

Don’t Borrow Money You Don’t Need

Do you really need the money? Firstly, borrowing money is sometimes necessary, but if you are borrowing to fund a lavish and unessential purchase, then it would be a lot cheaper to save for it instead. It’s a lot better to go without something than face the stresses of repaying a debt that you don’t actually need.

Don’t Borrow Money you Can’t Afford to Repay

Can you afford a loan? If you find it hard to stretch your money, then you need to work out if you can afford the repayments. Defaulting on a loan will damage your credit score, and make it even harder to borrow at a sensible price later. So be sure to take a hard look at your finances to work out what you can afford to repay each month. The golden rule of borrowing is to only borrow what you need, for the shortest amount of time possible.

Don’t Believe the Hype

It’s an unavoidable fact that having a poor credit history means lenders just don’t trust you to repay. This results in being charged high-interest rates. If you need a loan and you have a bad credit score, be wary of lenders who seem eager to lend to you whatever your circumstances. A responsible lender should only lend you what you can afford to repay.

Don’t Borrow without Comparing

Shopping around for the best deal you can find is essential. Remember that there are now hundreds of lenders offering different terms and different APR rates. If you have a poor credit score, your choice will be more limited, but even within the bad credit loans market, there is still competition between companies who want your business. So always shop around.

Don’t Ignore the Small Print

Reading terms and conditions might not be a lot of fun, but again, this is a really important consideration in finding the right loan. The small print should explain the fees and charges, APR rates, and early re-payment penalty fees if there are any. Be sure you know all the details before signing on the dotted line.

Don’t Despair!

Being rejected for loans is a miserable business if you need to borrow money, but there are still options available. If your friends or family don’t have funds themselves but are willing to guarantee a loan for you, then guarantor loans are a good way forward if you have a poor credit score. Again, always shop around for the best deal, and don’t borrow if you are already in debt – always seek specialist help.