Do you need to borrow money?

29Before you sign up for a credit card, bank loan or store card, or add to an existing card or loan it makes sense to think about whether you really need to borrow money. At times like this – with economic uncertainty and rising bills – many people are now choosing to pay back money they’ve already borrowed rather than borrow more.

Deciding whether you should be borrowing money

There are some very important questions you need to answer before you borrow money. You should ask yourself if you need to spend the money, if you have other ways of financing the purchase and if you can afford to pay back the money you’re planning to borrow.

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The Truth About Debt Consolidation

28Myth: Debt consolidation saves interest, and you have one smaller payment.

Truth: Debt consolidation is dangerous because you treat only the symptom.

Debt consolidation is nothing more than a “con” because you think you’ve done something about the debt problem. The debt is still there, as are the habits that caused it — you just moved it! You can’t borrow your way out of debt. You can’t get out of a hole by digging out the bottom. True debt help is not quick or easy.

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Best Loan Options for People With Bad Credit History

28The present economic situation has made a good credit score mandatory for people in need of a loan. An individual’s credit score measures his credit worthiness. In the US, the 3 credit bureaus, viz., TransUnion, Experian, and Equifax collect and compile information on a person’s credit history. Each bureau maintains a credit report and provides scores based on the system created by Fair Isaac Corporation (FICO) in the year 1958. A good FICO score is now a must for obtaining a home loan. Gone are the days of sub-prime lending. At present, a FICO score between 760 and 850 would mean an interest of 5.268% on a 15½ year adjustable rate mortgage, while a FICO score greater than 740 would entitle a person to a 30-year mortgage with an interest rate of 8.101%. A large number of bank failures in 2009 have resulted in banks and other financial institutions enforcing strict lending laws. In this situation, a person having less than satisfactory credit score will find it difficult to seek loans. Thankfully, there are a number of alternatives for such people, and they are mentioned below.

Payday Alternative Loans (PAL)

Banks and credit unions offer payday alternative loans for people with bad or no credit history. These loans, which are fully amortizing, are provided for a period of 6 months to 1 year. The APR on such loans is around 22% for people with points below 570. In case of points between 571 and 620, the APR is around 18%, while for people with scores over 620, the APR is 15%. A credit score below 620 is generally not healthy. Hence, it is obvious that these loans have been designed for people who need credit, but have a poor credit scores. There is no need for any collateral, and generally a person can borrow a maximum of $1000 and a minimum of $300.

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Auto Loans – The Good, Bad, the Ugly and the No Credit Ones

26With the economy in the doldrums, and the list of the jobless rising rapidly, credit ratings are not helping people to acquire car loans with ease. The banks and other lending institutions, in view of the tight economy, are tightening the screws, and even those who hold a credit rating of good or fair categories are now finding it difficult to obtain loans.

The banks now apply a careful choosing and vetting policy when it comes to doling out loans for new or used cars, especially in view of the hits they have taken in terms of a huge backlog of unpaid loans.

Bad Credit Loans

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How to Choose a Good Mortgage Lender

30“If you pay off your mortgage before retirement, you take a huge financial load off your shoulders. You also become eligible to take out a reverse mortgage once you turn 62.”
― Suze Orman
If you are planning to get a good mortgage loan, don’t just settle for the first company which someone recommends to you. Frequently, we hear about fraudulent mortgage companies duping borrowers for a large sum of money. In order to avoid this, it is advisable that you shop around for a mortgage lender who will understand your requirement and cater to it. Understand which kind of loan you want to avail: one with an adjustable interest rate, or a fixed one. Adjustable rates have a tendency to rise after 3, 5, or 7 years. This means that your monthly payment will also increase with a rise in the interest. Fixed rate loans for a longer duration have higher rates as compared to those for shorter ones. If you haven’t planned for this, it will become a burden for you. Hence, you have to be absolutely make sure that you have entrusted your money in the right mortgage lender. Conducting a cost comparison and negotiating the rates with lenders can help you to get a better price. Here are a few more tips that will help you choose the best lender or broker.

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