by Sharon Jones

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The reality for the vast majority of households all over the country is that what we earn is rarely enough to keep us going. Debt is just as much a part of normal life as eating these days - or so it seems - and it’s especially true when you have a large family. Your kids need clothes, school uniforms, equipment and all kinds of things - and if you don’t have the savings, you tend to have to borrow.

The trouble is, of course, that not everyone does well out of debt. It only takes a missed payment here or there for the financial walls to come tumbling down, and severe money worries springing up on the near horizon.

The big question we all face from time to time is whether or not we should borrow. Most of us have mortgages and car loans, which we will happily put ourselves in debt for. But the trickiest borrowing lies in the form of credit cards and loans - when, exactly, is it safe and OK to take them out?

In this guide, we’re going to explore everything you need to know. Read on for some handy tips on identifying the right time to borrow - let’s take a closer look.

After you have shopped around

Credit card and loan offers can be incredibly tempting. But you should never borrow just because you receive what you think is a good offer through the post. You have to spend some time looking at the market, and always think about the amount you will have to pay back over the lifetime of the loan - not the amount the lender is offering. Sometimes, you will find that a higher interest rate and shorter repayment period will be cheaper than a lower interest rate over a more extended period. Always do the math!

When you know what you are buying

Never forget that credit is money - you are mostly buying the ability to spend. The only difference between this and any other purchase is that you pay it back over time, rather than upfront. So it’s important to understand what the product is - especially regarding whether or not it is secured or unsecured. Unsecured credit - like credit cards, for example - tend to come at a higher price, but lower risk for you. Secured credit, however, while cheaper, is secured against something you own - usually your house. And if you don’t keep up your payments, you run the risk of losing that house.

Never on the spur of the moment

If you're buying something expensive - for example, a car or a beautiful piece of new furniture - think about payment options before you make your decision. Store cards that you might be offered will rarely give you the best possible deal, and more than likely will be a lot more expensive than credit from other sources. Again, always shop around - and avoid credit being offered on the spot unless you can guarantee it’s the best possible option.

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If you are repairing credit scores

Your borrowing depends on your credit score - you can find out yours by using credit reference bureaus. If your current rating is terrible, you won’t be able to borrow at all, and even if you can it will be at the expense of a very high-interest rate. However, by taking out small loans or credit cards and ensuring you pay it back - in full - every month, you will improve your score and eventually be eligible for the better deals. Just be wary that this takes a lot of dedication to achieve - or you could end up in a worse financial position.

When you don’t really need to

It’s a sad fact of life that when you need to borrow money, it’s probably best that you don’t. And the reverse is true, too. The reality is that when you are struggling, further debts will increase your burden, and once you start sliding down that slippery slope it is tough to make your way back up to security again. As the old story goes, if you owe the bank $100 they will ring you every day and hound you until they get it back. If you owe them a million, they will probably take you out for dinner and ask if you want to borrow more.

When you can afford to pay it back

This can be tricky to work out, but essentially you should only borrow money you can afford to pay back. It would be nice to think that all lenders think this way, but the truth is that we have all seen the damage they have caused by lending to the wrong people who can ill afford debts of any size. The critical thing to remember is that you should only borrow what you are comfortable with - and you don’t have to take the whole amount that is offered. Alternatively, you could take the entire sum you are offered but don’t spend it all - which can be better for your credit rating. Again, this takes a reasonable amount of discipline.

If there is a financial benefit

Let’s say you get a new job with a higher salary, but the new office is a little further out of town, and you can’t access it via public transport. In this case, it would make sense to borrow money to buy a car, as eventually, you will recoup more than the cost of the vehicle through your higher wage packet. However, if you are just borrowing money to get a better car, just because you want to look better in your new office’s car park, then it’s probably best to save up yourself. Otherwise you will just end up adding to your household expenses.  

And there you have it - there are right times and wrong times to borrow money. When you are running a big family, it can be tempting to borrow money when the chips are down, or you could do with treating yourself. However, with a more sensible outlook, you will avoid many of the significant issues that tend to arise when people borrow for the sake of it. Good luck!