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For the last several weeks, QCash has published a spring series detailing how credit unions can help their members master their money using principles of financial literacy. 

From the importance of budgeting and saving and understanding small-dollar loans to deciphering credit scores and more, overall financial wellness in the United States can improve if we increase financial literacy. 

This article wraps up the series with tips for responsible borrowing and shoring up long-term financial well-being. We live in a world where achieving financial flexibility and stability often requires taking out a loan. If your member needs a loan to invest in higher education, a home, a car, or another life event, understanding responsible borrowing is a must. 

Below, we offer guidance your credit union can share with members:

Borrowing
Photo: Tyler Franta | Unsplash
  • Borrow only what can be realistically repaid: For a safety net, it can be tempting to borrow more money than what’s actually needed, but it’s important for your member to resist that urge. Borrowing more than they need not only increases the total cost of the loan amount, but it also places them at risk of taking on unnecessary debt. Instead, members should calculate the precise loan amount needed while determining both immediate and future financial requirements, then borrow accordingly.
  • Explore all options: Just as important, members should be educated on all types of responsible borrowing options, including small-dollar lending options available through your credit union. QCash partners with credit unions to offer digital small-dollar loans to members through their mobile phone 24/7. In addition to speed and convenience, QCash’s platform allows members to borrow without a credit check while building on their credit profile with much less expensive annual percentage rates than predatory payday lenders. 
  • Avoid debt traps: Establishing a routine that fosters healthy financial habits will help your members avoid the perils of risky debt traps. For example, setting and sticking to a budget, maintaining at least six months of emergency funds, consistently paying off credit card balances in full, consolidating debt and monitoring cash flow. 
  • Prioritize long-term financial stability: In this era of economic ups and downs, the need for credit union members to plan and secure their long-term financial future is vitally important. Below, we list tips to help members prioritize their long-term financial health and stability:
    1. Set goals: The member should have clear, realistic long-term financial goals that are easy to keep track of, while holding themselves accountable to those goals.
    2. Invest: Members should consider various forms of long-term investment designed to build steady gains over years, perhaps decades. 
    3. Budget: Just like we mentioned above, a budget tracks members’ income and expenses. If the balance comes out close to even or negative, the member is spending more than they are earning and must adjust their expenses or savings habits, or both. 
    4. Save: Members should prioritize saving by paying themselves first when they get their paycheck or deposit. They should divert a certain percentage to their long-term savings and investment accounts to avoid spending before they save. Ideally, they should save 10-15 percent of their income for retirement. 
    5. Monitor credit score: Members should keep in mind that credit scores are still an important factor for their borrowing position and remain aware of what lenders see when they look at the member’s financial profile. 

A strong foundation of financial literacy and education can help support many of the goals and objectives mentioned above. Here are a few resources your members can turn to for advice or ideas on improving their financial health. 

This journey into financial literacy and education has provided credit union professionals with tips, tools, and advice to guide members in understanding personal finance management, small-dollar loans, credit scores, and strategies for navigating financial need. We hope you found them helpful. 

If your credit union finds itself in need of a new way of looking at small-dollar lending in this era of digital transformation, look no further than QCash. Feel free to go to our Request a Demo page to see the product for yourself, or Contact Us directly. We look forward to partnering with you!