For some people, taking out a loan during a recession might feel downright scary. Things are shaky after all, everyone’s nervous, and you’re probably asking yourself if it’s the right time to borrow money. The short answer is that it can be the right time to borrow money if you do it intelligently.
If you’re trying to keep your business afloat or cover your personal expenses, taking out a loan is a great idea. However, it doesn’t come without its risks. Here’s some essential tips to help you navigate borrowing money during tough economic times.
Know Why You Need It
Before we even think about filling out a loan application, it’s important that you get clear on why it is you’re taking out the loan. Get as specific as possible, and this will increase your chances of a lender letting you borrow. Lenders are particularly cautious during a recession, so they will want to know that you have a plan, and a way of paying them back.
The more you sell your application as simply a panic button the less likely they’ll be to approve your loan. Not to mention, being clear about why you’re taking out the loan helps you avoid borrowing more money than you need. Clear guidelines help you stay honest with yourself and stay focused about paying back what you owe.
Check Your Credit
Your credit score is the most important aspect of whether you get approved or not. Remember, your credit score is your overall financial reputation, and in a recession that score is more important than ever. Before you even bother applying for a loan, make sure you check your credit score, and ensure that you’re in a good place for getting approved.
Are there any mistakes you can fix to increase your chances of being approved? Any old debts that you forgot about? Pay attention now so you’re not caught off guard later after you apply. Not only will you increase your chances of being approved for a loan when your credit score is higher, but the higher your credit score is, the better the interest rate is. In a recession, every fraction of a percent counts, so get that credit score in check.
Shop Around
Taking out a loan is kind of like buying a car. Not all cars are created equally, and some come with more bells and whistles than others. Don’t go with the first car that you find for sale. (Of course we’re speaking in metaphors here, and we’re really talking about loans.) Get a few different quotes, compare offers, and choose the best loan for you based on all of the factors weighed out.
