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A Look at Lending Options

Because of unique circumstances, many people determine that it is worth it to borrow money to make purchases. Before you borrow, it is important to understand lending options and know the pros and cons of each.

Credit Cards
Credit cards are usually painted in a bad light; however, they can really be beneficial when you need to pay for things quickly. If you keep balances low or pay them off regularly, earning rewards and cash back for purchases can be beneficial.
Tip: Make a list of items you can use credit cards to buy like groceries or car repairs to help avoid using them for small unnecessary purchases.

Unsecured Personal Loans
Many lenders offer unsecured loans or lines of credit at lower rates than most credit cards. Many times, you can receive loans with introductory rates and/or no interest offers. If you are smart about repaying them, this can allow you to make purchases without a huge interest commitment.
Tip: Set up a payment plan for purchases made using an introductory no interest loan so you can avoid having to pay high interest rates once the introductory offer expires.

Home Equity Loans
If you have equity in your home, you can borrow from it. These loans can be tax deductible; be sure to check with your tax advisor regarding your unique situation. They typically have lower interest rates than most other loan options.
Tip: If you are going to use the equity in your home, only use it for things that will have a lasting value – college education, major home improvements, or in a major life emergency.

Payday Loans
Also called cash advances, payday loans are usually a last resort if someone doesn’t qualify for other types of loans. These loans usually come with a substantially high interest rate usually quoted as a fee or charge and are paid back with your next paycheck.
Tip: If you have to use a payday loan, make sure you do your homework looking at the lender's reputation and fees.

Many times people ask their family or friends to lend them money when they are in a difficult situation. It’s not a bad thing to ask for a loan from family: they may want to help you out, and they probably won’t charge you interest. However, if you are unable to pay them back or not in a timely manner, you have potentially ruined your relationship.
Tip: If you borrow money from a family member or friend, write out an agreement that includes the timeline and method for paying them back.


Posted: 11/25/2012 with 0 comments

Categories: Credit, Finances, Spending

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