Human beings are motivated to comply with rules since early in their childhood. As with almost everything in life, there are some basic social rules to follow when it comes to financial practices that can help you avoid a financial crisis. Often, people neglect these basic financial rules when borrowing money. As a result, they end up the victims of predatory lenders and unsavory debt collectors. This is why Direct Loans Lenders brings you a guideline with the Do’s and Don’ts of borrowing.

1. Keep in mind that the borrowed money comes with fees

Unless you borrow money from a close friend or family, be prepared to repay more than the sum you have borrowed. Seldom, fees are too high and exceed the reasonable limits. Lenders base their fees and charges on a number of factors, with the main ones being the borrower’s credit history, loan amount, and term.

2. Don’t borrow more than you can afford to repay

One common loan scam involves lending more money than the borrower can afford to pay back. This is also one of the main reasons why some people spend their entire lives in debt. When estimating the loan amount, also consider its APR, as it has a direct influence on monthly payments. Choose a sum of money that you can afford to repay and don’t exceed it.

3. Don’t extend the loans too far ahead

People take loans with terms from two weeks up to several years. Depending on the type of loan and borrowed amount, set a fair term for paying it back. A frequent mistake is to focus on monthly payments. Too often, people ignore the fact that they are going to pay those installments for the next couple years.

4. Save money

Sometimes, your debts are so high, it takes years to pay off everything. Set aside a certain amount each payday for an emergency fund and don’t borrow more. Ideally, your savings should cover expenses for about six months. The only way to prevent or eliminate debt or save money is to spend less than you earn. It is a magic formula everyone should live by.

5. Do research to find loans with lower rates and fees

If you do need a loan to get through a rough patch, it pays to look at the details. The loan principal may come with a low APR, but include a bunch of extra fees that make the loan unbearable. This can make a small loan much larger. Therefore, before signing any contract, do some research of various loan offers and see which one suits you best. Pay attention to the APR and fees.

6. Don’t borrow money unless you have to

Responsible borrowing is a trait too many debtors lack. They borrow to buy things like a dinner in a fancy restaurant or a designer handbag. This wild borrowing will not lead you anywhere good. Borrow money for long-term needs, like a business extension, buying a new car or paying for education. You might also take short-term loans for urgent needs, like healthcare, or unexpected bills and car or home repairs. Set your priorities right and avoid borrowing money for things you can live without.

7. Read all documents thoroughly before you sign them!

Too often, people are so eager to get the money, they skip the reading part and jump to the signing part. This too often leaves them trapped in terms and conditions they didn’t expect because they chose not to read what they agreed to. A loan agreement may come with surprising terms. Although legal terminology and small fonts are boring, read everything! Taking the time to read will pay off in the long run, especially when you realize that you might have signed something that would have backfired on you.

Statistics show that 34% of Americans have agreed to mortgage contracts without even knowing what type of mortgage they have. Likewise, most Americans tend to ignore the universal default clause in credit card contracts. Some don’t even read through the prepayment penalties on their loans. And if you find it difficult to learn all those terms, hire somebody specialized for help. A lawyer or a credit counselor may be able to spot unclear or unfavorable conditions and protect you from them.

8. Don’t buy bad loan products

A good loan product is a loan that helps you achieve certain important goals. A good loan is a stable mortgage, for example, which leads you to own your home and have it fully paid at the end of the term. Another example of a good loan is a low-interest car loan that gets you a car for your work. A payday loan may be a good loan product if it helps you get through a crisis and doesn’t become a burden when the due date comes. Keep in mind: high-interest loans and loans with extra fees are bad loan products.

9. Pay your loans on time

The senior director of public relations for the National Foundation for Credit Counseling, Gail Cunningham, has this advice to all borrowers; “Never miss a payment, never make a late payment, never make a short payment.” These are the key principles of responsible borrowing! If you cannot make payments on time, prioritize the creditors and only skip those bills with a less harmful impact on your credit. According to Cunningham, there are instances in which one single late payment can lower a person’s credit score by as much as 100 points! Plan your monthly budget carefully!

10. Never borrow money behind your spouse’s back

Financial problems are more frequent than one can imagine. Often, following the death of one spouse, the surviving spouse will start receiving bills they never knew existed. Also, statistics show that actions like these are common causes for divorce.

References and Sources

1. Top Tips for Borrowing. Retrieved from

2. 3 Reasons not to borrow. Retrieved from