Last week we introduced the concept of debt, where we talked about good and bad debts.
This week we want to talk about how to ensure that you have good borrowing power.
Having good borrowing power can see you grow your wealth exponentially. This is because you will never miss any investment opportunity that comes your way because of a lack of funds.
The main principle to keep and have in mind here is to be punctual in your payments.
Anytime you borrow money, doesn’t matter if it’s from a financial institution or a friend, or business partner, always honor the payment plan agreement, the only time this can change is if you want to settle the entire amount before the lapse of the agreed time, and if and when this is the case, have a meeting with the lender explain your view and agree with them, surely who doesn’t love early payments?.
Once you borrow any money, in your following month’s budget preparation you need to have an amount that will be for settling this debt, this will be guided by the payment policy that you and the lender will have agreed upon.
Benefits of paying your debts on or before time;
- You increase the trust levels of the lender towards you, this is because you kept your word.
- You become good business to the lender, if there was an interest amount to your loan, definitely the lender will be very likely to say yes to you next time you need some money, because they know that payment can be counted on, hence more money to them.
- You increase the loan limit capacity access, when you repay according to the agreed terms, trust is increased and this can be a good bargaining chip for an increase in credit limits when need be.
The reverse is also true, if you keep defaulting in your payments, the word is bound to go round if not being listed in CRB, which will in the end mean that you do not have access to loans even when you really need some.
Pointers: Before you get into debt have an established payment plan in place already.
This you can achieve by clearing knowing all the financial inflows that you are almost sure will come through the next couple of weeks, months, or years, then allocate how much you can put aside for payments of the loan.
This will help you when negotiating a payment plan, since you already know how much you can raise at each particular time, hence when you committing you to have facts to back up your commitment.
Take-home: Always pay your debts in time or earlier that the time limit never late nor default, in the case that payment is not possible communicate to the lender in a timely manner and apologetically.
Mbugua & Associates.