Smart borrowing tips

Borrowing money isn’t always bad, but only if you can afford to repay it steadily. Before taking a loan, make sure your income can cover your repayments over the full term (and not just the first few months). On top of that, life’s unpredictable, so you’ll need a backup plan like emergency savings or family support, just in case you lose your job or your income drops.

Smart loans can help you level up your life (like for education or a home). But the trouble starts when borrowing turns into overborrowing. The trick is to borrow on your terms, with a safety net, so that debt doesn’t end up controlling your future.

Signs of smart borrowing:

• You have a clear reason for the loan, and a realistic plan to repay it
• Monthly instalments fit within your budget
• You understand all the terms before signing

Common borrowing mistakes to avoid:

1. Borrowing for ‘wants’ instead of ‘needs’: That flashy new gaming setup or luxury bag can wait. Prioritise essential expenses like school fees, home needs, or medical bills.
2. Ignoring the total loan cost: Low monthly payments can trick you into long tenures, which means paying way more in interest.
3. Not planning for the ‘what ifs’: What if you lose your job? Always have backup options (like a side hustle or emergency fund) before committing to a loan.

How to borrow smarter:

• Use a loan calculator before applying so you don’t guess your repayment amounts. It helps you see whether the monthly payments fit your budget before committing.
• Compare at least 3 lenders (banks or government schemes). Even a small difference in interest rate or fees can save you hundreds or thousands over time.
• Keep your debt-to-income ratio below 35%. That means all your monthly debt repayments should be less than 35% of your take-home pay. This keeps your finances flexible and reduces stress if something unexpected happens.