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.
The consequences of your choice
See the consequences of this choice for Kelly and hear what the coach has to say.
“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.”
Great decision! Kelly was smart to first make sure she could handle her new monthly expenses. She might also consider contacting her utility company about a budget billing plan. This might allow her to pay the same amount each month, making it easier to plan her monthly budget.
The consequences of your choice
See the consequences of this choice for Kelly and hear what the coach has to say.
“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.”
Sorry … you gave Kelly some poor advice. Before adding more debt, she needed to be sure she could handle her new monthly expenses. If she can’t make her loan payments, Kelly should call her lender immediately to discuss the situation and what to do next.
The consequences of your choice
See the consequences of this choice for Kelly and hear what the coach has to say.
“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.”
Kelly was smart to analyze her budget and how much she could afford. But she should have avoided more debt until she was sure she could handle her new expenses. If she finds she can’t make her loan payments, Kelly should call her lender immediately to discuss the situation and what to do next.
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.