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Borrowing money requires careful consideration of its potential pros and cons, and money decisions are rarely simple. At the very least, you want to avoid overlooking important details that determine whether you need or can afford the loan, so here are some things to think about before committing to anything.

1. Is there a cheaper or better way to get what I need?

If you have to borrow money in the first place, chances are you want it to be as affordable as possible. Think about the short- and long-term implications of the loan.

For example, choosing a shorter-term loan likely means higher monthly payments, but will also mean you’ll pay less over the life of the loan, and, depending on the interest rate, that could mean massive savings. In some situations, you may want to explore opening a credit card with 0% promotional financing to purchase what you need, if you can pay off the credit card by the time the promotion ends. There may be another creditor with more reasonable terms, so don’t forget to research your options. Above all, be honest with yourself about what you really need.

2. Is the interest rate fixed or variable?

Interest rates go behind the numbers you see when the loan is originated. If the rate is variable, you may end up with a rate much higher than you expected, meaning you’ll have to pay more. A variable rate also means your monthly payments could change, which can make budgeting difficult.

3. Are there fees associated with the loan?

Most borrowers are familiar with late fees, but some loans also come with origination fees. An origination fee is a percentage of the loan balance, so the more you borrow, the higher the fee. Make sure you know of any other circumstances that could lead you to pay more than you intended.

4. What if I can’t pay?

You should never take out a loan you know you can’t afford, but unexpected economic events can completely change your financial situation and leave you without the cash needed for loan payments. Before you sign on, make sure you understand the consequences for failing to repay the loan and know what you would have to do to protect yourself during times of hardship. For example, student loan borrowers can get their loans deferred or put on forbearance, but those loans are very rarely dischargeable in bankruptcy.

5. What is my credit score?

Before you apply for financing, you should have a good idea of whether you will be seen as a good credit risk. You won’t know ahead of time what credit scoring model your potential creditor will use when reviewing your application, but checking the same credit score over time will give you a good idea of where you fall. You can monitor your credit data for free through Credit.com, which, in addition to providing credit scores, shows you the strengths and weaknesses of your credit profile and ways you can improve it.

If you go into a borrowing situation without knowing what you’re working with, you could be surprised to learn you don’t qualify for financing you need or end up paying higher (less affordable) interest rates.

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