If ever you come across in either business or consumer loans, give your thoughts on the following statements showing how to manage loans effectively (Security Bank Team). 1. Borrow for the right reasons. 2. Borrow only for what you need. 3. Know how much you can afford to pay. 4. Choose the right loan facility. 5. Monitor your cash flow, specially your spending. ​

ANSWER

Borrow for the right reasons.

When you borrow money, you should use it to buy an asset that increases value over time and has a potential to make your money — this is what he calls the good debt.

Borrow only what you need.

If you need P200,000 to start a business, then borrow only that amount, even if you’re eligible for a loan with a higher amount.

Remember that the bigger the amount you borrow, then the more interests fees you pay, the larger your monthly payments are, and the longer you most likely have to pay.

Know how much you can afford to pay.

Check your budget and see how much you can actually afford to pay every month. According to him, you should never assume you’ll have more money in the future, and just work within your current income.

Choose the right loan facility.

Banks and most financial institutions can definitely offer much lower rates. And when it comes to borrowing money, getting the lowest interest rate should be your priority.

Monitor your cashflow, especially your spending.

After getting the money, keeping track of your spending should now be your priority. Be sure that you’re not splurging your borrowed cash on unnecessary or unplanned purchases. Another thing, make sure to always pay on time to avoid extra charges.