Category Archives: Loans

4 Common Loans

Loans. They’re not something that everyone deals with, but some people have to deal with the burden of them every day. If you go to college, buy a home, or get a car, you’ve most likely had to take out a loan in some point in time.

There’s a lot of hoops and stuff that people have to jump through to get some loans, and then other loans are a simple, streamlined process. Today, we’re going to look at 4 of the most common types of loans and talk a little about how you obtain each of them

 

1. College Loans- Out of all of the loans we’ll cover today, these are probably the simplest to obtain. Why? Because you get most of them approved by the Free Application for Federal Student Aid (FAFSA). Stafford Loans and Perkins Loans are both based on need and are a result of filling out the FAFSA. Then, private loans just take the information from the FAFSA and use it to determine your eligibility as well.

2. Home Loans/mortgages- A home will most likely be the most expensive thing you’ve ever owned or bought. It is the loan with the highest risk, and therefore, if your credit score is lousy, you aren’t going to get it. To get a home loan, you need to go to your local bank or credit union, and you most likely need a cosigner. Good news? You’re usually married when you buy a home, so there’s a built in co-signer. The person in charge of loans at your financial institution is the one who will guide you along in your decision making process.

3. Car Loans- Car loans make up most of the loans taken out in a year (outside of student loans). Because they are lower risk, it’s more common for someone to take out a car loan before any other type of loan. These loans are less likely to require a co-signer unless your credit isn’t doing well. Usually, you can get these loans from a bank or from the car dealership that you are purchsing from.

4. Small business loans- The most complicated type of loan to get is the small business loan. Not only do you have to have decent credit and a co-signer to get the funds from these loans, you also need to have a business plan that is approved by the bank you are applying for your loan through. If you are adding on to a business that already exists, you need to work with your bank to determine if the additional funds are an acceptable reason to take out another loan. Usually you’d do that for an addition to a building or to get new technology. They also look at the health of your business and the potential for those funds to be paid back instead of defaulted on.

Most people in the United States have taken out some sort of loan, have you? Which of these have you taken out? Share some thoughts in the comments and have a great week!

Credit Card Tip:Don’t Cancel Any Credit Cards Before Applying for a Loan

creditcardcut.jpgThe last thing you want to do is to cancel your credit card(s) right before applying for any types of loans, this is a bad idea. Canceling your card can affects your credit score negatively. When you have a lower credit score, that will result in higher interest rates and also may increase your fees. It doesn’t hurt for the account to stay open but it can hurt if you close it.

Instead of closing your account just leave it open, it doesn’t hurt. If you’re never going to use that credit card again, pay off the credit card or transfer your balance to a card with a lower interest rate and cut it up. You can cancel the credit card once you’ve decided that you’re not going to be needing a loan anytime soon.

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Building your Personal Credit Report

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Personal credit Reports include personal information, employment information, payment history, a list of creditors, any bankruptcies you may have or lawsuits.

Since credit reports are what many employers are using now days as a way to gauge one’s personal habits and tendencies, it’s a good idea to check your credit report once a year just to make sure that your report is indeed correct. It’s very important to make sure that your credit report is not only correct but also you want to show that your credit history is consistent and promising.

Here are some general credit report tips.

Some credit report payment history tips:

  • Pay your bills on time. Delinquent payments and collections can have a major negative impact on your overall score.
  • If you have missed some payments, get current and stay current. Be consistent. The longer you pay your bills on time, the better your credit report.
  • Be aware that paying off a collection account will not remove it from your credit report. It will stay on your report for seven years.
  • If you are having trouble makings ends meet, consult your credit counselor. This will not improve your report immediately, but if you can begin to manage your credit and pay on time, your report will eventually get better as time progress.

Some positives and negatives that will affect your credit score.

Positives:

  • Steady/consistent employment
  • Active credit use of few accounts.
  • Remember, credit to debt ratio is very important.
  • Do not request for new credit cards.

Negatives:

  • Late payments
  • Missing Payments
  • inconsistent employment.
  • Multiple credit card accounts
  • Small finance loans
  • Bankruptcies and Foreclosures

Many people assume that because they have never missed a payment that they have good credit. They are a few minor things that the average person overlooks that could be costing them points. These are all minor things that can be easily and effective taken care of if you know what to look for.

Check out your credit report and see for your self.

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Debt management

debt-reduction.jpgDid you know that the average American household with at least one credit card has nearly $9,200 in credit card debt? That’s quite amazing isn’t it? Looking at the number, it is a little hard to believe that the average is so high, but when you realize that our nation is built on credit, it becomes a little more easier to gulp down.

There’s the good and the bad:

When I look at debt, I see it as two kinds of debt. There’s the good debt and the bad debt.

You accumulate good debt when you’re borrowing money for a student loan or for a home. You just have to make sure that you don’t borrow more than you can pay back.

Bad debt is using your credit card to buy things like food, clothes, DVD, etc. This is the easiest way to fall in debt. When you get in the habit of buying things with your credit card, in return you also want to get in the habit of paying it off in full that month.

The general rule is that you don’t want to get in a habit of using your card unless you plan on paying every back that month, this is the fastest way of falling in debt. Here I have gathered 3 general debt management tips.

Debt management tips:

  1. Make a budget journal. Most people spend thousand of dollars without too much though as to what they’re buying and that’s why people are surprised at how high they’re credit card is. Get a nice journal and start writing down everything you spend. At the end of the month you’ll know not only how much you spent but also what you bought. This way, you will know what you can cut back on and how much less you want to spend the following month.
  2. Pay off your highest-rate debts first. On average, most people have more than one credit card. The key to getting out of debt is to first pay down the balances on credit cards that charge the most interest rate while paying at least the minimum due on all your other debt. Once you finished paying off the highest rate, then start tackling the one next highest.
  3. Expect the unexpected. You want to expect the worse can happen at any given time, so start making an emergency account. You want to have enough saved to last you 3 – 6 months of living expenses in case of those emergencies. If you don’t have an emergency fund, a trip to the hospital or damaged car can seriously upset your finances.

If you end up with more debt than you can manage, then you should get some help whether it’s from a professional or someone you know before it’s too late. It may be embarrassing to ask a relative for some help but that’s alot better than ending up with bad credit.

I just got approved for a credit card limit of 25k!

credit-card.jpgWow, all these years paying my credit card on time and it looks like it’s finally starting to pay off. I have now been trying to build my credit for about 3 years now, consistently checking my credit report and making sure to meet my payments each month and finally, my bank decides that they can “trust” me with a credit card with 25,000.00 dollar limit. Woot!

My first credit card had a limit of 2,000 dollars and back then, that was a lot for me. I was really happy to know that I was worthy of being offered a credit card with that high limit. Ever since then, I’ve always been trying to see how much of an increase I can get by calling and asking every 3 months. So I guess in a way, that was one of my motives for wanting to increase my credit score, so that one day I can have a credit card with limit that’s over 20,000.00 dollars. And now that I finally got this limit, I hate to say it but I think I’m going to have to decline it.

So you’re asking why decline the offer I’ve been working so hard for? Well there are plenty of reasons I guess. Here are 5 reasons:

  • Accepting this credit card with 25,000.00 might lower my credit score. Although my initial reason to build my credit was to have an enormous credit limit, now I’m looking in to buying a house within the next four years. I need to keep my credit score up so that it will help me get the necessary amount for down payment for the house.
  • I already have 3 credit cards and another one is not necessary, especially since I am in the process of getting out of debt from my previous credit cards. Accepting this credit now would be really stupid move for someone whose trying to get out of debt.
  • Having high credit limit is not always a good thing. One, it can lower your credit score, and also what if your wallet gets stolen? Then what? The higher the limits your credit cards has, the more damage the person who finds it can do.
  • Having that high credit card might just influence me to go out and use that card. Not a good thing.
  • I really don’t have the use for it. I’m just happy that I got offered :)

Anyways, on top of my credit card offer which was going for the rate of 12.15%,I was also offered an auto loan for 50,000.00 at 6.24% and also a personal loan for 3,000.00 at the rate of 11.5%. In total, it comes to a nice grand total of $78,000.00! And although it’s very tempting, I’m not accepting any of this.

How to lend money to a friend

money203.jpgThe old saying goes like this, “Lend money to a friend and you might lose both”

Most of us know or have known couple of deadbeat friends or famliy members who has borrowed money and never paid it back. Truth is, friendships and families often break up when a borrower fails to pay back a personal loan. This is why it is very important to make sure there are no misunderstandings when letting your pal borrow money.

There are plently of good reasons for lending money to our good friends and family members. We like to be able to help them out with tough life struggles such as job layoffs, a divorce, health issues, debt issues, rent and the list goes on. Unfortunately, there are times when our good intensions can turn into hard feelings when the borrower fails to pay you back.

Here are some facts:

  • According to the money-etiquette survey conducted by Ipsos market research and commissioned by PayPal, 63% of respondents have seen someone skip out on paying back a friend, and 57% have seen a friendship or relationship end because of it.
  • We are more likely to lend money to immediate family members (71%) or relatives (57%) than to friends (54%), co-workers (30%) or roommates (20%). Nearly half of us (48%) typically lend $100 or more.
  • But getting paid back is another matter — and more than half of us (55%) have been stiffed.

Kim Izzo and Ceri Marsh, authors of “The Fabulous Girl’s Guide to Grace Under Pressure,” say handing over the cash without a repayment plan is a prescription for disappointment.

Here is a guideline to write down when lending money to a friend/family member:

  • The loan amount.
  • The date of loan.
  • The date or schedule of repayment.
  • Rate of interest (if any).
  • Collateral (if any).
  • Both of your signatures.

Keep in mind that there are alternatives for those who cannot pay you back. A fallback plan may be to take it out of trade; babysitting, yard work, painting projects, house cleaning, ect.