Image courtesy of Vasenka Photography
Image courtesy of Vasenka Photography

Borrowing money is sometimes not something which can choose the timing for. If you need money for an emergency and cannot delay, then you will have to borrow then. However, sometimes you can plan more and decide when to borrow, perhaps when buying a home or doing some refurbishments to the home or even buying a car.

Borrowing is something that we should be cautious about and if we can save up and buy the item, rather than borrowing money for it, then this is the best thing to do. However, sometimes it is not possible to save enough that quickly or easily and so borrowing is the only way to get it.

It is important though, to make sure that when you do borrow money, that you do it at the right time. Obviously if interest rates are low, then this is a cheaper time to borrow. However, if you are borrowing over a long term, then the rates may change and even if rates are low, it does not mean that you are borrowing at the best time for you personally.

You need to consider your personal situation. Consider how much income you have at the current time and whether you can afford loan repayments on top of the other expenses that you have. Think about the future as well and whether you think that your financial situation will change. Consider how safe your job is, whether you are likely to have any pay rises, whether you might have children in the future, whether you expenses might change significantly and anything else that may change in the future that could have an effect on your ability to afford repayments.

Obviously the amount of money you borrow and the term of the loan will be very significant. If you are just borrowing a small amount on a credit card, then you should be able to pay it back quite quickly. However, if you are taking out a 25 year mortgage then this has more far reaching effects.

It is worth thinking about whether you already have any debts and how successful you are being in paying them back. If you are struggling, then borrowing more money at this time would not seem at all wise. However, if you are managing to pay it back then this is a good sign. However, it may be wise to pay off other debts before taking out more, if it is possible for you to do this.

No one can predict the future, but it is worth thinking about what the future might be like. Consider what changes may happen and how that will affect your income, both in the economy generally and to you personally. Imagine how you would cope if interest rates went up, if you lost your job, if you had a child and things like that. This could be seen as negative thinking but it will enable you to think about the consequences of your decision and what might happen in the worst case scenario. If you feel that you would still be able to cope in those situations then it is safer for you to borrow the money.