How Much Should You Borrow?


The decision to borrow money should never be undertaken lightly. Any type of loan will come with its own rules and terms, which you will need to adhere to in order to prevent your loan from affecting your credit rating, business or even your home.

The majority of loans are obtained from banks or independent lending providers. The most common application processes are completed either online or by way of a face-to-face meeting. Before you apply for a loan or mortgage, you will need to decide how much you need to borrow. Borrowing too little may mean that you are unable to achieve your goals, but borrowing too much might make it harder to pay back your loan.

Assessing Your Finances

There is no definite amount that any person should aim to borrow. The trick is having such a good understanding of your finances that you can make an informed decision based on your own personal circumstances.

In order to determine how much you need to borrow, you should first take stock of your existing finances. These could be your personal finances or those of your business. Take stock of all your income and outgoings, as well as those predicted for the next 6 months to a year. Often it’s the case that when a person really takes a good look at their future financial predictions, they find that they’re happy to forgo applying for a loan.

Choosing Your Loan Type

In the event that you find you are still in need of loan, you will need to determine what type of loan is best for you. There are many different types of loans, including secured and unsecured, long and short term, and personal and business loans.

Terms and interest rates vary between both loan types and lenders. You may find that one lender is able to offer better terms than another, meaning you can safely borrow more without running the risk of defaulting on your loan.

Preparing for Your Loan Meeting

If you decide to borrow from a high street financial provider you will most likely have to attend a face-to-face meeting as part of your application. This is most often the case when applying for a business loan. Before you meet with a potential lender, you should decide how much you wish to borrow and try to stick to this amount. Being honest about your financial requirements will help you to stay firm when confronted by an attractive interest rate or lending incentive.

What Happens if You Borrow Too Much?

If you find that you’ve borrowed more money than you need to, you may be able to repay your debt early. However, not all loan providers offer this option so it’s worth checking that early repayment is an option included in your loan terms and whether or not it comes with a penalty. Borrowing too much may have serious repercussions for your financial future, so even if you aren’t able to pay back your loan early it’s always worth putting aside any extra money you have in order to ensure you’re able to meet your repayment obligations.

4 Responses to How Much Should You Borrow?

  1. these are great tips to help out people who are looking to borrow money….but my answer to “how much should you borrow?” is simple: As little as possible!! 🙂

  2. Very nice points to ponder on. I can’t place it at this moment but I remember reading or hearing somewhere to never loan an amount that is bigger than the money you take home. I heeded that advice sometime in the past but still, it didn’t work for me. Still, I learned a valuable lesson and to this day, I shy away from loans as much as possible hoping there wouldn’t be a reason where I will be forced to borrow again.

  3. Mark Ross says:

    I agree with Brock. One should only borrow as little as possible. It can be a very bad idea to borrow too much, so this post is a great resource for those wondering how much they should borrow.

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