Planning ahead and keeping control of your cash flow are key suggestions for those who want to borrow from banks. Being in debt is not unusual, as all of us might need financial help at one time or another. It is wise to think the loan process through, from getting into debt until repayment is finished. At least you will know where you stand and how you can get into trouble later.

Before taking out a loan, be sure that you really need it. Consumer-finance gurus say the most constructive use of a loan is to invest in something that will end up providing you with a higher return than the cost of borrowing.

Such investment uses include buying a house, educating yourself or your children, and starting or expanding a business. Ultimately, how efficiently the loan is put to use depends on the individual borrower. With a housing loan, you would likely get a better place to lead your life and engage in activities including working, while a loan for a business allows you to boost your income.

However, it might take longer to realise the benefits of education. A better education should increase your future earning power.

Consumers have also been warned of some less-productive borrowing uses that could lead to trouble, such as for buying consumer goods. Interest payments will increase the cost of vacation trips, clothes and other dimensions of a good life, while you would not generate much income from these things. Borrowing for high-risk investments may later return a loss.

Now, if you decide that you really need to go in debt, think ahead. Experts warn that you shouldn't wait until the last minute before seeking a loan. Otherwise, if the bank declines your loan application, you won't have time to shop for another.

To encourage a bank to grant you a loan, there are several points to consider.

In Thailand, consumer credit ratings are becoming more and more important, although they are still in their infancy. Most Thai banks belong to the Central Credit Information Service, the country's credit-rating bureau. Lenders can learn about the new credit applicant's rating by looking up the data stored at the bureau.

It is worthwhile to build a history of creditworthiness, the key word to make them trust that you are a responsible borrower. This includes repaying debts on time or ahead of schedule, and keeping your lenders informed in case any problems arise.

To gain more trust from the bank, you might need to show them that you keep accurate records of your income and expenditures and foresee the need for borrowing before it comes. You certainly need to show them that you have a good repayment record and act promptly when any unexpected problem occurs.

It will be easy for them to grant you the loan if you show them that you understand the lender's concerns and procedures.

Finally and most importantly, request a loan that you really can afford to repay - and then do it.

Normally, a risky borrower is likely to pay a high price for a loan or may be refused, while a low-risk borrower will be offered a better loan at a lower price.

Looking into the details of each use of a loan, personal-finance experts warn that those who wish to own a car have to consider carefully whether it is better to pay for it in instalments or in cash.

Not only is a car a depreciating asset, it also imposes a maintenance burden on the user with expenses for repairs, insurance, petrol, parking, fines and taxes.

Experts suggest that you can buy a car on credit if you can still earn enough to pay for the loan and also save at least 25 per cent of your income. But if you are only a young worker with limited savings, it's best that you think twice about how to finance that car.

Credit cards may be highly useful for a consumer's daily life, as you don't need to carry bundles of cash around to shop for big items. But many have taken advantage of the free credit period offered by credit-card issuers by obtaining several cards from various banks and paying off the balance on the first card on the first day of the next card's billing period.

They wish to obtain a free loan for a long period by continuing this kind of cycle. But this is, in fact, not a clever thing to do as it is difficult to manage and may be end up being an illegal activity if you make inaccurate statements when you apply for more credit cards.

The credit-card interest rate is capped at 20 per cent. The minimum monthly payment rate is 10 per cent. The most effective way is to pay off a credit-card loan like a charge card. That means you should always pay the balance on your credit line in full, as you will get up to 40-55 days of free credit.

Paying part of your outstanding credit balance would cost you up to 20 per cent in interest, which is quite high, but failing to pay it on time will cost you the penalty rate, which is much higher.

Jiwamol Kanoksilp

The Nation