For many consumers the need to borrow money at some point is expected. Loans and borrowing are used for a whole range of different needs and as a result it is important consumers make an informed and well researched decision before committing to a specific agreement. Depending on the need for borrowing consumers will find there is a good selection of loan types and lenders who are able to assist. As much as selecting the correct type of loan is important so too is the need to ensure the loan itself is affordable and realistic to a monthly budget and expenditure. Many consumers who take a form of borrowing later express how difficult they have found it to realistically manage the longer term commitment required. This is why ensuring the loan is affordable and absolutely required must also play a part in the decision process.
As mentioned above consumers make the decision to borrow for a number of different reasons. Traditionally borrowing was reserved for large scale purchases where a long term commitment was result of approval. Consumers tended to reserve lending for the purchase of houses, home improvements, cars or even holidays (on a slightly smaller scale). In these instances consumers made a pre-planned decision to commit to repayment term in exchange of a substantial purchase. Consumers wishing to obtain such credit would visit the traditional high street banks and complete an in-depth application process to ensure the loan was affordable. Some consumers used credit card facilities instead but often the application process was very similar. Given the nature of the purchase consumers endeavoured to maintain the commitment until repaid. This meant treating the borrowing as a priority commitment and ensuring it was budgeted for as required.
In today’s economy there is a much larger range of lending which is available to consumers. Over the last few decades the way in which people borrow has changed quite dramatically and as a result the requirement to manage money is more important than ever. Today a consumer could obtain a loan ranging from £50.00 right through to £25,000.00 from a large number of suppliers. The rise of the internet means the resources available to consumers for borrowing has increased massively over the last few years particularly. This does not mean that large scale borrowing is more available and instead refers to shorting term borrowing availability. In fact there are now a number of sources for consumers to quickly borrow between £50.00 and £2000.00 if they wish to do so. The entire process is conducted online and therefore makes this type of borrowing very accessible. As a result consumers are now using borrowing for a much broader set of reasons which are completely different to traditional loans. Nowadays consumers are able to borrow without committing in advance to the lender what the purpose of the loan is. This means a consumer could borrow an extra £100.00 for a weekend away or £500.00 for a holiday. In either case the lender would not be questioning the reason.
This change in spending habits brings around a greater need for consumers to be able to manage their finances in a sensible manner to ensure over-spending does not occur. This is because the access to borrow means that typically, consumers are paying out larger sums in terms of their monthly commitments than ever before. It is now likely that an average consumer’s budget will include normal living expenses as well as commitments made for non-essential items as well. It is therefore easy to see how some consumers find themselves in a position where they cannot afford to repay everything they have borrowed. It is in these cases that a cycle of debt can be created as consumers continue to balance one form of borrowing against another. In such cases it would be advisable for consumers to consider the free resources who currently exist. There are a number of charity based organisations who can offer support and budgeting guidance to households who are struggling financially.
Ultimately a budget is a very simple tool which can be used to achieve a controlled result. Many consumers find by reviewing their monthly spending through a budget it is easier to understand where cut backs can be made. Without a budget or planner of some sort it is fair to say the majority of consumers would have no idea where month on month all of their money is really being spent, budgets are a great way of avoiding just that.