Taking out a loan isn’t exactly a new thing. Many people do it to help them achieve their goals or make ends meet, especially in Singapore. In fact, countless Singaporean borrowers use their loans to finance education, property or car purchases, medical emergencies, and various other reasons.
However, borrowing money entails certain responsibilities, including ensuring the money borrowed goes to its intended purpose. Unfortunately, many borrowers are easily distracted by other expenditures and purchases.
This article will give you a few practical steps to ensure your loan proceeds are spent wisely.
Tip #1: Create a Detailed Budget
The very first thing borrowers should do to manage their loans responsibly is to create a comprehensive budget. This budget serves as your roadmap to properly spend your borrowed money, ensuring they go where they should go.
For instance, if you took a loan from a trusted money lender in Singapore for home renovations, you should break down the costs of finishing the project—materials, labor, permits, and unexpected contingencies.
Tip #2: Track Your Spending
When it comes to responsible loan management, a comprehensive budget is only half the battle. The real test is sticking to it by tracking your expenses against your allocated budget. Borrowers have it easier now with budgeting apps readily available to download on mobile devices. Or they can simply use spreadsheets.
Keeping track of your expenses and categorizing them lets you pinpoint areas where some adjustments can be helpful.
Tip #3: Shop Around and Compare Prices
Frugality is a trait many Singaporeans possess. This trait comes in handy when it comes to managing loan proceeds properly. Before making any purchases, shop around for options, so you know what vendors and sellers offer. Doing this lets you find the best deals that suit your budget and needs.
Shopping around to compare prices is particularly crucial for big-ticket purchases like appliances or furniture. This applies to whatever project your loan is for. The key here is to never settle for the first quote you get.
This step not only applies to expenses but also when looking for reputable lenders to borrow from. When you shop around for lenders, you might find better loan packages from a Ubi money lender compared to one from Orchard Road, or vice versa. Regardless, performing due diligence will serve you well in the long term.
Keeping Your Finances Aligned
Loan management is easier when paired with purposeful spending. It simply means allocating the money you borrowed only to things that will help you achieve your goal as quickly as possible. Doing this will help you align your spending with your long-term goals.
In many cases, borrowers misspend money intended for a specific project or goal because they get caught up in non-essential and impulsive spending. Knowing what the money is for and being disciplined to stick to your goals ensures loan proceeds are spent properly. This gives you greater control over your finances and makes loan repayments much easier and less burdensome.
Other Considerations
That said, one of the challenges many borrowers face in Singapore is the high cost of living. Because of the premium price tag attached to living in SG, many borrowers get derailed from their goals. Unexpected expenses often come up, eating at the borrowed money allocated for urgent things.
This is the main reason budgeting is necessary for loan management and responsible borrowing. You are better equipped to take on monthly loan repayments without compromising your other financial obligations.
Another unique factor of living in SG is your contributions to the Central Provident Fund (CPF). These are automatically deducted from your salary, significantly impacting your monthly budget. Always factor in your contributions when planning your loan repayments.
Wrapping It Up
To build a financially secure future, you need to learn how to manage loan proceeds effectively. Fortunately, this skill can be learned and mastered. You only need the drive and discipline to stick to your budget and practice frugality.
Do your homework before making any purchases, especially big ones. Know your options so you can make wiser and more informed spending decisions.
