Calculating how much to borrow can be a difficult matter. Even if you know the exact thing that you want to buy with the money, you need to decide whether to borrow exactly that amount or whether you feel that it would be better to borrow a bit more.
Advantages of Borrowing Extra
Borrowing a bit of extra money will enable you to buy even more things. If you needed the loan because you had no money left and had to buy a few things, then having some extra could give you a buffer. This means that if you had other financial needs, you could pay for those as well. It will give you something to fall back on, just in case you need more money
Advantages of Borrowing Just Enough
If you borrow just enough money to pay for the things that you cannot afford, you will not be tempted to buy extra. If we have some extra money it can be tempting to spend it. It can be tempting to buy things that we do not really need and this could be a waste. Without this money, then there will not be the temptation to spend extra.
Disadvantages of Borrowing Extra
Borrowing extra may sound good, but it does come at a cost. If you borrow money, then you not only have to pay it back, but you have to pay back the interest too. You may have additional charges if you cannot pay it back as well. Unless you take out payday loans which has to be paid back in full very quickly, you will also have the burden of having a debt hanging over your head. This can be a big stressor for some people.
Disadvantages of Borrowing Just Enough
If you borrow just enough money, then you may find that you need more before you next get any more money in. This means that you may need to get another loan. This may be difficult as your lender may not be prepared to give you another one. If you have a poor credit limit you may struggle to find another lender who will give you some. You also have to go through the hassle of choosing another loan which can take a lot of time and energy.
It can be a difficult decision as to whether to borrow just enough or a bit of extra money. It may come down to each individual to judge according to when their next form of income is due to come in, what expenses will be needing to be paid soon and how much money is available to borrow.
Guest post by Travis H.