Credit Do’s and Don’ts – Tips for Considering Loans

You find yourself needing to take out a loan.  Maybe it is for bill consolidation, or a home improvement loan.  Or, perhaps, you need a more reliable vehicle.  Whatever your reasons, you need to consider all of the effects both negative and positive of taking on more debt.  If you use these tips, you might save yourself some headaches in this area:

Look for alternatives first.  Is there a different way that you can accomplish the same thing without having to take on more debt?  Do you have a source of income that can help you get through and work on this problem little by little?  Most people think they need money right now, but in reality could stay with their current circumstance while they put money away to pay cash for an item.

Continue to save.  Do not cease to put money into savings.  Even if you cut the amount in half, that is still better than nothing.  Your savings is needed for things like money emergencies and that is important these days.

Look for the best rates.  Shop around in search of the best rates and terms that you can find.  If you are looking locally, be sure to check out at least three sources to be able to make a good comparison.  Stop in at a Credit Union and see what kind of rates they offer.  They are usually better than the local banks.

Check out details.  Read the details on any credit application before you sign.  Many a borrower laments the fact that if they had seen a specific detail before they took out a loan, they might have gone somewhere else.  You are responsible for living under those terms, so make sure you are aware of them and understand the ramifications of your decision.

Make your payments.  Make your payments on time every month.  In order to shorten the term of your loan, if you have extra money, make extra payments to get the balance down sooner.  That is always a good thing.

Consider the cost.  When you look at the application, look at the interest rate, fees and other costs associated with the loan.  Make sure you go into this one with your eyes wide open.

Ask yourself for reasons.  Examine your motives for taking on the debt.  Refuse to do it on a whim.  Imagine yourself with the payments every month and what it will do to your overall well-being.

Stay away from usurious loans.  Watch for bad loans.  Do not take out a payday loan under any circumstances.  The interest alone can be over 400%.

Communicate your intentions.  Make sure that you talk about taking on this debt with your significant other.  Most arguments about finances can be diffused by talking first and finding a way to agree on a plan of action.

Pay down balances.  Work hard at paying down the balances on your loans in order to eliminate them.  Even though it might cause a temporary drop on your credit score, think of the freedom that you will feel in not having to make the monthly payments.

Check your budget.  Look at your budget and make sure that you have the overhead with which to pay the loan.
If you use these tips, you might find yourself in a better position with less debt.  Remember that debt in and of itself is not a bad thing, but it can be injurious to your finances, health and well-being.  Use it wisely and you can live a more satisfied, content lifestyle which is a much better way to live in the long run.

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This entry was posted on Thursday, April 16th, 2009 at 6:47 pm and is filed under Credit Score, Financial Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.