If you’re going to take on debt you want to do so in a mindful way. That means borrowing the minimum, at the most favourable rates. There’s a strategy for making this happen. Here are the key points.

Cut your credit lines

When you apply for a personal loan, the lender will assess your overall financial standing. This includes seeing how much debt you have already. If you have regular loans, the lender will see that you are paying them off. If, however, you have lines of credit, for example, credit cards and store cards, then it will be much harder for a lender to see where they stand.

This is because these types of products allow you to keep recycling credit as long as you stay below your overall limit. In theory, it’s best to avoid these products. In practice, that’s not necessarily a feasible option for the average person.

What is a feasible option, however, is keeping these credit lines to a minimum. If you have accounts you don’t use then formally close them. If you have small balances, pay them off and then formally close the accounts.

Work on your credit score

Your credit score matters a lot. For the most part, the only way to improve it is to demonstrate financial responsibility. This means that it can take a lot of hard work to build up, but only a few silly mistakes to do it very serious damage. Do everything you can to pay all your bills in full and on time. If you really can’t then contact your lender and come to an arrangement with them.

Speaking of lenders, make sure that you always keep your lenders up-to-date on your address. This is probably required by the terms and conditions of your account in any case. It also helps protect you from identity theft. The fact that it also helps keep your credit record in good order is a nice bonus.

As a final point, make sure you register on the electoral roll at the address you have on your various accounts. This is an easy way to give your credit score a nice boost.

Think about the lender’s point of view

At the end of the day, a lender wants to get their money (capital and profit) in full, on time and without any hassle. Think about what you can do to reassure them that you’re the kind of person who can make that happen for them.

When considering this, remember that it’s both unethical and illegal to deceive a lender. There is, however, nothing either unethical or illegal about timing decisions when it best suits you. For example, if you’re planning on moving home or changing jobs, then it may be better to do so after you’ve secured your personal loan.

Similarly, be careful about changing homes or jobs regularly. Quite bluntly, if a lender needs to chase you up about something, they need to know where and how to find you.

Look off the beaten track

If you know you’re not exactly the perfect borrower, then you may find that the best deals lie off the High Street. For example, you might want to look at credit unions. Even if you are the perfect borrower, it might still be in your best interests to look off the beaten track. In short, you can only be sure that you’ve chosen the best deal if you know what all your options are.

Be aware that going off the beaten track means going further than the major price-comparison sites. If this sounds like more work than you have time or energy for, then a broker may be your best option.

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