Scenario: Managing a loan

Test your judgment. Given Kelly’s situation, which decision do you think is best for her?


Kelly bought an older home two years ago. She recently got a loan from her bank for a major purchase: adding an air conditioning system. Now she’s considering remodeling the attic to create an extra bedroom. She’ll need another loan to do it. Purchases worth borrowing for?
Before taking on any more debt, she should make sure she can handle her new expenses.

The consequences of your choice

See the consequences of this choice for Kelly and hear what the coach has to say.


Kelly “I’m so glad I didn’t borrow more money. When summer weather hit, I started to use the air conditioning – and my utility bills went so much higher than I thought they would. If I had borrowed more money, it may have been tough to afford my house payments. To maintain a good credit history I’ve got to pay all my bills on time. Otherwise I’ll lose money in late fees and my credit rating will go down.”
Apply for the new loan and see if she gets approved. The remodel will add to her home’s value.

The consequences of your choice

See the consequences of this choice for Kelly and hear what the coach has to say.


Kelly “What was I thinking? Between my house payments, loan payments, and higher utility bills with the air conditioning, borrowing more money was probably the last thing I should’ve done! If I don’t pay my bills on time, I’ll have to pay late fees on top of everything. Now my credit rating might go down.”
Determine the new loan payment amount. Only proceed if it fits her budget.

The consequences of your choice

See the consequences of this choice for Kelly and hear what the coach has to say.


Kelly “I thought I could handle the second loan, but I was wrong. I didn’t figure in my higher utility bills because of the air conditioning. Now I’m struggling to pay my bills on time and cutting back on things I don’t want to. I wish I’d waited before borrowing more.”
Submit
Remember: If you’re having trouble making loan payments, contact your lender immediately to discuss your situation and how you can work with them to repay.
The basics of loans Compare the terms Compare interest rates The loan process Choose a lender the smart way Warning signs to watch out for You’re at risk Scenario: Choosing a lender If the lender says no… Scenario: Managing a loan