Financial Correspondent - Every 2nd Sunday
Resource : http://www.askmen.com
Whether you're starting a small business, remodeling your home or just paying some bills, from time to time you'll need to borrow money. Whether you choose to use your line of credit or take advantage of some equity in your home, you'll want to know what you're getting yourself into before you sign the deal. Here are some things to consider.
1- Shop for the best interest rate
The main thing that you'll be comparing when you're looking for a loan is the best interest rate, which is essentially the price of the money. It's easy to fall for a good sales pitch, but a prudent borrower does his homework. Ask several banks for quotes and then do the same with brokers. You'll get an idea of the price range, but don't be afraid to tell the lowest-priced broker that you think he can do better, especially if other quotes are close. Of course, you need to make sure that you're comparing apples to apples, so be certain that your loan quotes reflect the same amount and time period, and be sure to account for fees.
2- Consolidate your loan
Loan consolidation can have two advantages:A- It's easier to manage one bill at the end of the month instead of three or more.B- You can lock in a low interest rate.
Of course, you take a risk; if interest rates continue to drop, you may not be able to reconsolidate, which means you'll be paying more for your money. But if they rise, you'll be sitting pretty.
Of course, you take a risk; if interest rates continue to drop, you may not be able to reconsolidate, which means you'll be paying more for your money. But if they rise, you'll be sitting pretty.
3- Use equity
Your home equity is actually your money, and sometimes it pays to use it. You can take equity out (essentially, get a check from the bank equal to some or all of your equity), or you can open a line of credit against your equity (essentially using your home as security for the loan). Because this is a secured loan, you should get a better interest rate than a credit card, but on the downside, if you default, you could lose your home. If you take out a home equity loan, make sure you do so to finance a worthwhile project.
4- Utilize your line of credit
If you don't own a home or don't want to use your home equity, you can use your line of credit. Essentially we're talking about a credit card. While charging it is almost never the foundation of solid financial planning, a credit card has its merits. First, they're great in an emergency. Second, you won't have to justify your plan to anyone before you charge, which means that you have ample flexibility. On the downside, you're going to pay higher rates. However, you should always try to negotiate a lower rate with your credit card company. Remember; credit cards are a competitive business and it never hurts to ask for a deal.
5- Check the fine print
Whenever you sign a loan document, you'll need to check the details. Two big issues to keep in mind are default and early repayment. Default means that you did not pay on time, and you'll want to know when you're technically in default (30, 60, or 90 days), and what that means (does the whole balance become due; can they seize your assets?). On the other hand, you'll want to know about early repayment. It may sound odd, but some lenders charge a penalty for repaying early. After all, the sooner you pay, the less interest they make. So you'll want to know if you can do that without a penalty.
6- Avoid payday loans
Companies that advertise cash loans with no credit check and no collateral make their money by doing volume business and charging outrageously high rates (upwards of 300%) and penalties. Those companies prey on the desperate guys out there, and they should be avoided at all costs.
7- Maximize your credit score before you borrow
The price you pay for the loan will depend greatly on your credit, so if you're planning to borrow in the immediate future (six months out), check your score and see what you can do to improve it. If you've missed payments on credit cards and utilities, make sure that you make timely payments for the next six months. And take that time to clear up any mistakes or outstanding issues on your credit report.
borrowing money
Shopping for a loan can seem like a daunting task, especially if you've never done it before. But in a lot of ways, a loan is just like buying a car or a major appliance; they all come with different features and prices. Once you get beyond the intimidation factor, you'll see that with multiple sources, you'll be able to compare apples to apples. So do your homework.
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