Manage Your Loan Responsibly
It can be smart to use a personal loan to pay off a major expense rather than take on high interest credit card debt, but it's equally important to use your loan responsibly. You will stay on track if you manage your funds wisely whether you are planning a wedding, a home improvement project, or planning a family vacation.
Plan your budget
Budgeting is ideal before getting a loan, but you never know when it may be too late. Before you make a single purchase, take time to determine how much you can spend.
It is possible for some things to cost more than you initially planned regardless of how well you prepare. Factor affecting the pricing of supplies, the cost of labor, and product/service shortages beyond your control.
Prices or labor rates can fluctuate throughout a long-term home improvement project. You will avoid being blindsided by unexpected expenses when you prepare for at least a 10%-20% cushion.
Take a realistic look at your situation
As soon as you have your budget, start researching the products and services you'll need to find out what they'll cost. A majority of remodelers admitted it was more expensive than they anticipated to buy products or hire services.
Comparing prices can limit your overspending and help you stay on track. It is possible you could save thousands by choosing one tile set over another when remodeling a bathroom.
It may make sense for you to scale back how many flowers you order for your big event after seeing how much they cost.
Be prepared for sticker shock before it happens. It can be hard to get a grip on your budget and spending when you don't do your research, so setting a budget and checking your expenditures early on can often be crucial for helping you.
Identify priorities
You might have to adjust your budget and prioritize your spending after you've set a budget and researched everything you intend to buy. Once you have paid down some of your loan, decide what you need now and what you can defer.
Rather than buy everything on your wish list for your big move, consider delaying some items until later, or if you can do it yourself at a lower price. When you have a beach vacation planned, choosing between scuba diving and deep-sea fishing might be difficult.
Early on, you can set yourself up for success by considering your options and making firm decisions.
Avoid impulse purchases
The temptation to overspend can be strong when you see your vision coming to life and your bank account is full from your loan, but don't forget this is all money you will have to pay back. Once your loan is in your bank account, a $100 item here and a $250 service there might not seem like a big deal, but these expenses can quickly deplete your account.
Make sure to stick to your budget after you've spent so much time planning it! Develop better habits for controlling spending by knowing what your temptations and triggers are.
Re-Forecast, Review, and Revisit
It's crucial to revisit, review, and re-project your budget when you're working on a home renovation or other long-term project. Spending must be monitored frequently to prevent it from getting out of hand. It is much easier to correct a 10% budget overrun than a 40% one.
It's not just the budget that should be constantly reviewed to keep a project on track. If you find that the project scope, the number of workers, and future resources are not within your budget, you should correct course quickly. In the absence of pre-planned work, billable hours can grow out of control.
Conclusion
It's possible to achieve your goals through a loan if it is carefully managed, but only if it's managed responsibly. Your chances of achieving your goals and paying back your loan are increased with smart planning, foresight, and diligent budget management. We do not recommend that loan be you first choice, but if you have one a coach at Lionhood Financial can help you build a budget and plan to use the funds well.