Borrowing & credit · 5 min read
Before taking new credit, map the debt you already have
A lower monthly payment is not automatically a cheaper or safer outcome. Before refinancing or adding borrowing, make one list of what already exists and what problem you are actually trying to solve.
Create one debt list
For each commitment record the balance, interest rate where known, monthly payment, remaining term or promotional end date, and whether the borrowing is secured against an asset.
Separate cost from cash-flow pressure
Two people can have the same total debt but very different problems. One may be paying expensive short-term interest; another may have a temporary monthly cash-flow squeeze. The solution should match the problem.
Be careful when turning unsecured debt into secured debt
Securing borrowing against a home changes the risk. A lower rate or payment can also be accompanied by a longer term or the possibility of losing the property if repayments are not maintained.
Know when borrowing is not the next step
If debt payments are compromising essentials or arrears are building, appropriate free debt support may be more useful than another credit application.