With the current tough financial times, more and more people are getting desperate for money and would do almost anything to fund their budget deficits. Commercial banks have discovered this harsh reality and are capitalizing on it by coming up with innovative ways of luring you to borrow from them. They offer you “quick” and “easy” solutions to you financial problems by providing you with: Personal loans, Mortgages and a bank overdraft.

Borrowing from the bank might be one way of get through these tough financial times but it is not necessarily the best solution to all your financial problems.

Borrowing from the bank or any other finance lending institution would mean that you are committing to pay back the original amount of money plus a certain percentage of interest within a specified time frame. You need to consider how borrowing money will affect your finances in the future. You should consider the following before you borrow money.

1. Cutting down on expenses.

You might be experiencing a temporary financial set backs that you see yourself being able to resolve over time, but before then, you still have certain expenses. Borrowing from the bank could be a possible solution but what if you opt to cut down on expenses. You might be surprised to discover that cutting down on your expenses can help you to significantly spare money, eliminating the need to borrow.

2. Postpone purchases.

Often things that seem necessary really are not. You can postpone most purchases until you have saved up the money to buy the item upfront. You might consider taking a loan in order to buy a car, but what if you were to save up for the car. It might take a while but the desire to own a car could motivate you to save up the money more quickly than you expect.

3. Borrow from family or friends

Perhaps the only solution to your financial problem is borrowing, but it would much cheaper to borrow from your family members or friends. In most cases they won’t expect you to pay them with an interest, and in case they do, the rates will be quite low.

4. Boost your income

Try to think of ways through which you can do something to improve your usual income. Maybe all you need is not a loan but a boost on your income. Come up with creative ways through which you can supplement your income. Try taking a part time job through which you can supplement your income.

If you still find it inevitable to borrow from the bank, then please take the following precautions:

*Go for a bank that will not just give you banking and lending services only, but one that will offer support, advice and guidance among other services. The bank should then tell you how soon you should get the loan, weather there are hidden charges and most importantly go for a bank with the lowest interest rates possible.

* It is important to have regular conversations with your relations manager to ensure that you are on top of your finances and that you are being managed in the best possible way.

* Go for fixed interest rate. Taking a flexible interest rate exposes you to the danger of paying higher monthly premiums when the interest rates rise.

* Aim at keeping the loan for the shortest possible period because the longer you take to repay a loan, the more interest you pay.

* The bank might decide to tempt you by offering to extend your loan amount over a long period and in turn reduce your monthly payments. As tempting as this may be, always remember that the longer the loan, the more interest you will have to pay.

* You should also consider the long-term effects if you were to lose your job. This means that you have extra pressure to find a new job quickly, because any late payments or skipped payments will affect your credit record. Depending on the industry you are in, you may have a difficult time finding a job if you have a poor credit history. You need to consider how you will pay this loan off if you were to lose your job.