LOANS

Before you make an application for any Loan, whether for a home or car, make sure that you understand where you stand in terms of Credit and Finances. The terms of your loan, as well as whether or not the loan is likely to be granted, are directly related to your credit score.

Your Credit Score is an objective indicator used by creditors to determine how much risk will be involved in loaning you money. Scores range between 300 and 850. Lower scores indicate higher risk, and are off putting for creditors. There are exceptions. A special niche has sprung up recently to cater specifically to higher risk clients. The fees for these loans are generally exorbitant, but for those with no other options for purchasing a home or car, they can be helpful. As credit improves, more reasonable rates can become available with refinancing.

Loans are classified as secured or unsecured. Car and home loans are considered secured because in the event of default the lender can reclaim the property (foreclosures/repossessions). Credit cards and personal loans are unsecured. If you fail to pay, the lender does not have as much leverage. Of course, tactics they have employed include phone harassment, garnishments, liens, etc. but results are mixed.

When you apply for and receive a loan, your creditor makes a profit from the associated interest and fees. You can save money by comparing Interest Rates and terms from various lenders before you make an application. If you review your credit report before you make an application you should have a general idea of what terms will be available to you.

Calculate costs over the life of the loan to determine if it is right for you. If not consider other options such as:

Home Loans
1. Putting off the purchase for a year while you improve your credit score.
2. Take a second job and save a larger down payment.
3. Rework your budget to increase your savings.

Car Loans
1. Save up for a used car.
2. Take a home equity loan and use the funds to purchase a car.
3. Join a credit union.

Try to think beyond the moment. If the terms of your loan will become burdensome with time, decide on another course of action. Under certain circumstances a 15,000 loan will total 45,000, or more in payments in five years.

Always consider carefully to protect your financial health.