Borrowing with your eyes open
A loan is a commitment that follows you for months or years, not a quick fix for a bad week. This page sets out what to check before you agree to anything, and what to do if repayments become difficult.
Four questions worth sitting with
None of these take long, and answering them honestly is the difference between borrowing that helps and borrowing that hurts.
Can you afford the repayments?
Work out what is left after your regular commitments, then check that the repayment fits inside that with room to spare. Not exactly, with room to spare.
Do you need this much?
Borrowing more than you need costs more than you need to pay. Take the amount that solves the problem, not the maximum that happens to be available.
What is the total cost?
Look at what you repay across the whole term, including any fees, rather than at the monthly figure on its own. The monthly number is designed to look small.
What if things change?
Ask what happens if a payment is missed or your income drops, before you sign rather than after. The answer should be clear in the agreement.
Questions worth asking out loud
A lender who is straight with you will answer all of these without hesitation. If any answer is vague, treat that as information too.
- What is the total amount I will repay?
- What is the interest rate, and is it fixed for the whole term?
- Are there any fees, and when would they apply?
- What happens if I pay late or miss a payment?
- Can I repay early, and would that reduce the total cost?
- Who do I contact if my circumstances change?
Deal with it early, not quietly
Falling behind is far more common than people assume, and almost every option available to you gets better the earlier you act. Waiting and hoping narrows the choices; a phone call usually widens them.
What helps
- Contact the lender before a payment is missed, not after
- Work out what you can realistically pay and say that figure
- Speak to a non-profit credit counselling service in your province
- Be very cautious about new borrowing taken out to cover existing borrowing
- Keep a written record of what is agreed
Still weighing it up?
There is no rush and no deadline here. Read through the questions people ask most often, or get in touch if something is still unclear.