Evaluating Borrowing Cost

Are you capable of Borrowing? 

When it comes to borrowing money, it is best to keep these simple reminders to mind. ^^
  • Remember that it is not bad to borrow if you can pay. Just remember not to borrow for your "wants." Instead, borrow for your "needs" only if you really have to.
  • Remember that borrowing requires you to have cash to pay for interest and principal in the future. In deciding whether to borrow or not, it is safer not to assume that whatever steady income you are receiving from your current job will still be present in the future.
  • As a rule of thumb, when you are using more than 30 percent of your regular income for debt payment, that means you are borrowing too much already.
  • When borrowing, it is important to understand how to compute for the Effective Interest Rate. With the different borrowing schemes, one might be led to think that you are borrowing at a lower interest rate when in fact you are actually paying more. Learning how to compute for the Effective interest rate will allow you to compare them on an even scale.
Understanding the Effective Interest Rate


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