Your FICO Score and You

So, you want to get a personal loan so you can go out and get that shinny new toy you have been longing for all winter. Maybe you want to get a motorcycle, or you just want a high-end grill.
No matter what the case is for you personal loan, that FICO score is going to come up during the application process. Do you know what all those numbers and legal mumbo-jumbo means? Here is a quick breakdown of that craziness the credit agencies call your FICO score.
FICO score breakdown
Your score is influenced by five factors. These factors also come with a weighted measuring system. The factors and their weights are:

• payment history with a 35 percent weight,
• your current debts with a 30 percent weight,
• credit history length with a 15 percent weight,
• new credit accounts opened with a 10 percent weight,
• and credit types with a 10 percent weight.

Now that you know where the biggest areas of credit scoring come from, let’s take this even further.
Payment history and current debts rock your FICO score
When you apply for a personal loan, the lender is going to see all of your debts and payments. They are going to know that you have missed five payments on your auto loan. Missing a payment to the electric company most likely will not hurt you until the electric company goes to the collection agencies.
The lenders are also going to see that you have small loans out all over the place. The good thing is they can’t see you owe Aunt Jenni $5 for lunch. So you are ok there, well, at least to the bank.
What really crushes that FICO score is collection agency issues as well as delinquent credit account. The best thing you can do for yourself is to watch how much money you have out and ensure you can pay all your debts on time.
Controllable and uncontrollable factors
There is one item you cannot control in all of this. That item is length of credit. An 18 year old will never have the credit history of a 50 year old. It just will not happen. What you can control is how that credit build from 18 – 50.
When you apply for a personal loan, don’t apply at several places. All these applications will show up as new credit. If you get five personal loans, people are going to see this. If you apply for ten personal loans and only get two, lenders will see this as well. Best bet, apply at one or two places and only do it on a yearly basis.
Manage your credit types
There are several credit types as well. Did you know a credit card from Sears is different from a plain old Visa credit card? They both carry different weights. The same is true for mortgages, auto loans, credit cards, and retail cards. Knowing how to manage these accounts can be very beneficial in easily boosting that FICO score.
This was only a basic rundown of how to read your FICO score. Armed with this information, you will be better off when you apply for that personal loan. Who knows, you just might teach your banker a little something. It could happen!

How Credit Scores Work

Chances are pretty good you’ve seen, heard or read an advertisement recently telling you that you need to know your credit score. If you’ve applied for a mortgage, a car loan or a personal loan, you’ve probably been told that your credit score was within a certain range, which qualified you for a certain rate of interest. In some cases, you might have been denied a loan, and told that the reason you were denied the loan had to do with your credit score.
What is a Credit Score?
At the end of the day, a credit score is just an imaginary number. It is supposed to indicate to a lender how likely it is that you’ll default on your personal loan, mortgage or credit card. The credit score is a sort of shorthand that’s designed to make life easier for lenders. Rather than digging through your credit report and looking at everything there, they can look at that number.
Where does it come from?
A credit score is generated by a computer that looks at a bunch of data and packs it together to form a concise picture of your credit history. The algorithm used to generate your credit score is complex and a closely guarded intellectual secret. The most popular credit score comes from a company known as the Fair Isaac Corporation. This is known as your FICO credit score.
Improving your score
The most common question people have about their credit score is how to improve it. There are a number of things you can do to improve your credit score, including:

• Check your credit report for errors. Because your credit score is calculated based on your credit report, errors will lead to an incorrect credit score.
• Pay your bills. This goes almost without saying, but if you’re constantly paying bills late or not paying them at all, your credit score is going to drop. Pay your bills in full and on time.
• Watch your debt ratio. If all of your credit cards are maxed out, you’re going to have a worse credit score than if they’re not.
• Use your credit. If you’re not using your credit at all, however, you’re not going to have as good a score either. Make sure to use it some, but to pay most of it off on a monthly basis.

Another Look at Your FICO Credit Score

In addition to getting your free annual credit report, it’s worth getting your FICO credit score from time to time as well. You have to pay to get the score, but the fee you’re going to pay is typically going to be in the area of $10 to $20. Your credit score tells a lot about you, but more importantly it tells a lot about how creditors are going to see you.
You need to understand a few things about credit cores first. Your score is a number from 300 to 850. The lower the score, the less creditworthy lenders will believe you to be. A high credit score doesn’t guarantee you’ll be approved for a loan, such as an unsecured personal loan, and a low credit score doesn’t mean you can’t get any credit. In general, however, the higher your score, the better off you are.
Here are some general guidelines, based on your score:

• FICO score of 700 or above. This means you have Excellent or Very Good credit. You might get a better rate if you have more than 720 or 740, but in general at 700 you’re going to get a decent rate on your personal loans.
• FICO score of 680 to 699. If you fall in this range, you can get a normal loan. This is considered average credit. You’re not at the top of the list, but you’re not at the bottom.
• FICO score of 620 to 679. Here you’re getting into rougher territory. Your credit is OK, but it needs some work. You’re going to pay a little bit more in interest than folks who have better credit than you do. At this level, you might have trouble getting an unsecured personal loan.
• FICO score of 580 to 619. You’re down toward the bottom of the acceptable range. You can get credit, but it’s going to be with worse terms. A loan is going to be expensive.
• FICO score of 500 to 579. You have bad credit, there’s no getting around it. You’re not likely to get an unsecured personal loan at all.
• FICO score of 499 or below. You’re in dire straits. There’s not much you can do to get a loan at this level.

Getting the Best Personal Loan Rates

If you’re in the market for a personal loan, the temptation can be to just go with whatever your first offer is. You walk into your local bank or credit union, apply for the personal loan, and sign on the dotted line, crossing your fingers that you’re getting a decent rate.
This is a pretty irresponsible way to get a personal loan. If you want to be smart with your money and not pay more than you need to pay, you need to do a little bit of shopping around. Even a half percentage point difference on the interest rate can make a huge difference when it comes to the amount of interest you’re going to pay over time.
Here are some things you need to do if you want to get the best personal loan rates:

• Make sure your credit is as good as it can be. Not everyone has perfect credit. That’s understandable. But you need to make sure that there aren’t errors on your credit report, too. Getting a copy of your credit report, which you can do for free from Annual Credit Report, is essential. It allows you to identify potential mistakes, as well as see if there are any old debts you may have forgotten about.
• Choose the right personal loan for the task. If you’re buying a used car, you will probably be able to get a lower rate on your loan than if you’re using the money for debt consolidation. Talk to the lender about how you intend to use the money from your personal loan, and what type of personal loan will best suit your needs.
• Shop around. Not all lenders are just going to offer you the best possible rate from the outset. In some cases, you’ll have some room to negotiate. If you compare lenders, you may also be able to use one lender’s offer as leverage for another lender. At the very least, shopping around lets you pick a loan with terms that best fit your situation.

The Three Cs

When you apply for personal loans, there are several things that banks consider. They do their best to get an accurate picture not only of your financial state, but also of what kind of a person you are. And while no amount of research can tell a bank who or what you are inside, or even whether or not you will honor the terms of any agreement you make with them, there are three things in particular, often called the “3 Cs,” that banks look for when considering you for a personal loan. Do your best to make sure your 3 Cs shine, and they will take care of you when it comes time for you to borrow money from the bank.
Character
Believe it or not, the bank wants to know what kind of a person you are. Unfortunately, they don’t have forever and a day to get to know you personally, so they have to rely on your public record. On particular, they like to run a background and criminal record check. They want to know if you’ve been in trouble in the past and, if so, why. That isn’t to say you’ll never be able to get a loan if you’ve run afoul of the law, but it does make it a bit more of an uphill climb, especially if any crimes you’ve committed are financial in nature.
Capacity
Of course, banks want to know if you have the ability to repay any personal loans they make to you according to the terms set forth in the loan. This is based on your income and your debt to income ratio. In other words, they want to make sure you are making enough money, and that you don’t already have too much money going out in payments to meet your needs.
Credit Score
There’s been a lot of hype about credit scores lately, but it boils down to this. Pay your bills on time, and you’ll have a good credit score. If you do fall behind on a bill, pay it as soon as you can. If you can’t pay it in full, pay something on it. All of these things show up on your credit score, and paying late or partial payments is a lot better than paying nothing at all.

50 Articles on How Personal Loans Help Your Credit

Credit scores can be a confusing and intimidating number that directly influences a person’s financial stability. The higher a credit score is, the easier it is for a person to get a car loan, mortgage, credit cards, and other types of credit. There are many options available for consumers to reduce debt and increase credit scores. Having a personal loan can help build up credit if it is consistently paid on time, but late payments on a loan will decrease a credit score.  Consumers should shop around before taking out a loan to make sure the loan is right for them.  A debt consolidation loan may also help credit scores rise if utilized properly. There are many financial tips, techniques and suggestions that can be done to increase a credit score.

1. Improve Your Credit Score by 100+ Points: Information on what a credit score is and tips on how to organize and reduce debt to raise the score.
2. Poor Credit Can Cost You: 9 Ways to Increase Your FICO Credit Score: 9 things a person can do to increase their credit score and gain control of finances.
3. The Dangers of Long Term and Interest Only Loans: A deeper look at long term and interest only loans and how they affect consumers.
4. Borrowing Wisely: Find out how to borrow money wisely by learning about saving, spending, and loans.
5. How Does Debt Settlement Affect Your Credit Rating?: Debt settlement is when a person negotiates a one-time lump sum debt payoff, and since creditors usually do not receive the total balance of the debt, they will usually report the delinquency to credit bureaus.
6. Debt Consolidation Loan – Pros and Cons: Information to help decide if debt consolidation is the right answer for each individual person.
7. Improving your FICO® Credit Score: Tips on how to improve your credit score and reduce debt.
8. What Lenders Look For in a Credit Score: Suggestions on cleaning up one’s credit and increasing credit score.
9. The Secret to Getting Out of Debt: Forget Snowballs and Interest Rates: A Father’s suggestions on how to get out of debt.
10. Finance 101: Good Debt vs. Bad Debt: A man discusses what good debt is and what bad debt is and provides questions for his readers to ponder.
11. What NOT to say in your Personal Loan Application: A humorous and true account of things a person should not put on a loan application, including asking for a loan for a pony.
12. Improve Your Credit Score Easily With These Tips: Tips to reduce debt and improve credit score, including paying loans and credit cards on time.
13. How To Use Debt To Improve Your Credit: Having debts, such as loans, that are paid on time over a period of time can actually help your credit.
14. Ask Jean: How to Check — and Establish — Your Credit: This is a Q&A about requesting a credit report to check for accuracies and tips on how to build up positive credit.
15. How To Pay off Credit Card Debt: A Success Story: A blogger provides tips and techniques to become debt free, inspired by another blogger who became completely debt free in 3 years.
16. Getting a Grip on your Personal Finances:  Article about various personal financing products and how to keep them in good order to achieve and retain a good credit score.
17. A Beginner’s Guide To Personal Loans: This article provides basic information on personal loans, both secured and unsecured.
18. What are Debt Consolidation Benefits?: Six reasons why debt consolidation is beneficial.
19. Loans Tips – Managing Your Personal Loans: How to decide if a loan is the right option and tips on how to choose the best loan.
20. 5 Tips For Repairing Bad Credit: No matter what a current credit score is, these 5 tips will improve and help to repair credit ratings.
21. On Being Broke: A women’s experiences with no money and bad credit, how she views money, what she does with her money, and how she is going to get a loan to help improve her financial situation.
22. Debt Relief Strategies – Debt Consolidation Tips: Tips on how to consolidate and improve debt.
23. 12 Bizarre Things That Harm Your Credit Score: This article takes a look at 12 things that harm credit scores that consumers often overlook.
24. Top 10 Personal Loans For People With Bad Credit:  This is a list of 10 different types of personal loans, with explanations.
25. Debt Settlement Companies Will Not Improve Your Credit Score: A financial blogger answers a question about working with a debt settlement company and explains how this can cause a credit score to fall.
26. Will Paying Off an Unsecured Loan Raise My Credit Score?: This article describes the difference between paying the regular monthly loan payments and paying thanks loan off completely.
27. Avoiding Personal Financial Blunders: People with bad credit can follow this advice to be able to spot and avoid financial scams and traps.
28. FICO Mythbuster #345, Paying Off Installment Debt Will Improve Your Scores: A credit reporting and scoring expert explains how paying off installment debt actually causes a credit score to drop.
29. Banker Says – Carry Debt to Improve Credit Score: Paying off a debt early will decrease the debt to credit ratio and raise the credit score.
30. 15 Min Finances: Pay Off 1 Debt This Month: A financial blogger discusses her plan to pay off one debt by the end of the month. She talks about how paying off a debt will not only improve a person’s financial situation but it can also lift their spirits.
31. DFA Weekly Link Rally: Saving Money to Repay Debt in Lump Sums: A financial blogger provides his thoughts on paying off loans in lump sum payments instead of paying off the debt all at once.
32. 42 Ways to Radically Simplify Your Financial Life: 42 things that can be done to improve and simplify many financial situations.
33. Learn About Your Credit Score – A Quick Guide: Myths and truths about credit scores, how the score is calculated, and activities that can help or hurt credit scores.
34. What’s A Good Credit Score? Should You Care?: Detailed explanation of a FICO credit score including how it is calculated, what the numbers mean, and how to obtain a credit score.
35. 15 Ways to Establish and Improve Your Credit History and FICO Score: This blog post provides 15 ways to improve a FICO score and credit history including paying bills, such as loans, on time.
36. Paying Old Collection Accounts Bummer: A quick answer to a blog reader asking why his credit score only went up 13 points after paying off all the debt being held in collections.
37. 5 Tips to Understanding What Affects Your Credit Score: The Money Coach talks about 5 behaviors that will affect a person’s credit score.
38. Seven Steps to Get Out of Debt: A list of seven action steps and behaviors to get financial organization and reduce and eliminate debt.
39. How do I get my old debts paid off so that I can raise my credit score?: Bill answers a reader’s question by providing information on how to pay off debts to raise credit scores.
40. How to improve your credit score and become credit worthy: Simple ways to improve credit scores, including having a history of paying debt on time as 35% of a credit score is based on payment history.
41. Secured Personal Loans: A summary of secured personal loans, including advantages and drawbacks.
42. Debt Consolidation Service, Does This Damage Or Help Your Credit?: This article discusses whether debt consolidation will increase or decrease a credit score, including immediate and long term results.
43. Get New Good Credit Started: This is an outline of tips on how to turn bad credit into good credit such, as having a loan and making payments on time.
44. Credit: John Tesh writes about common credit report mistakes on his blog, explaining that credit reports and credit history is just as important as a person’s ancestral history.
45. Ways to Eliminate Debt with a Personal Loan: Information how a personal loan can help reduce or eliminate debt.
46. Fix Bad Credit: This author suggests changing a billing date so that payments are made prior to the company reporting credit standings.
47. An Overview of Instant unsecured Personal Loans: For emergencies, instant unsecured personal loans can help people with bad credit.
48. How To Pay Off Debt Fast With Debt-Snowball Technique – A Case Study: A look at the Snowball Technique of paying down debt with the highest interest rates first.
49. Proceed With Caution When Closing A Credit Account: It may surprise people to learn that closing a credit account or loan may cause credit ratings to drop.
50. Debt Reduction Methods and Philosophies: Snowball, Avalanche and More: An in-depth look at the various philosophies and methods of reducing debt and increasing credit scores.

The Almighty Credit Score

Whether you are seeking personal loans, looking for a new car or apartment, or even looking for a new job, your credit report can be your best friend or your worst enemy. These days, our credit affects much more than simply how much money we are able to borrow from the bank and what interest rate we’ll need to pay. Every aspect of our lives in today’s world is touched and affected by credit.
So, how do I build good credit?

That largely depends on where you’re coming from. The first thing to do is to know where your credit is right now. You can check this from any number of free Internet sites which allow you to check your credit scores with the three major credit ratings bureaus: Equifax, Experian, and Trans Union.
If your credit is good, you’re doing something right. Still, you’ll want to make sure your entire report is correct. Even seemingly small transgressions like a late payment here or there can hurt you in the long run, and you’ll want to make sure that anything negative on the report at all is accurate.
If your credit is not so good, you have some work to do. Fortunately, credit scores can start to rise fairly rapidly if you just start paying off old debts. Look your credit report over, and make at least some payment on every bill you owe, while trying to pay them off one at a time. Even if you are unable to make full payments, show that you are trying to pay your bills off. Your show of good faith will improve your credit score (or at least mitigate how much it is hurt).
If you haven’t established any credit one way or another yet, you have a clean slate. Unfortunately, it can be tough to get personal loans or any other kind of credit if you have no credit history. Many banks will lend to those with poor credit before they’ll lend to those with no credit. One of the best things you can do for yourself is to take out a small loan. You’ll probably need to present something as collateral, so be prepared for this. Once you have the loan, make the payments on time. Better yet, make the payments early.
Don’t pay off the loan too soon, though. Believe it or not, if you make a habit of paying off money you borrow from a bank too quickly, they are hesitant to loan again. Banks make much of their profits from the interest on loans, and someone who pays all of their loans off way ahead of schedule means the bank isn’t making much on the loan. And that can make them hesitate to loan more money.
Slow and steady is the rule. Don’t borrow a lot of money you don’t need, but borrow a little here and there, and pay it off one month at a time.

 

0digg

Building Credit with Personal Loans

Posted September 11th, 2010
by PersonalLoans.org Staff (no comments)

 E-MAIL  More

__
If you’re just getting started out in life, and haven’t had the chance to establish any credit yet, personal loans can be the perfect way to get started. These small loans can be used for practically anything, and they typically have much lower interest rates than credit cards.
Of course, if you have no credit history, you will probably be required to offer up something of value as collateral, but that’s OK. Even if the bank doesn’t require you to offer collateral (called an unsecured loan), it’s often a better idea to go ahead and offer collateral anyway, as this will typically allow you to get a better interest rate, saving you a considerable amount of money.
Collateral is anything of value that you agree you will give to the lending institution if you fail to pay your loan back. It’s their way of making sure that they will receive something of value, even if you default on your loan. Of course, it can seem a bit scary to offer up your valuables as collateral, but the dirty little secret is this: the bank doesn’t want your stuff. They want you to repay your loan. Because of this, most banks are usually willing to work with you even if you do fall behind to avoid the need to collect on the collateral.
When you take out personal loans, start small. Make sure that the payments are really going to be within your budget. The last thing you want to do to your credit rating is default on a loan. If you are not absolutely certain you can make the payments every month, don’t take the loan. It isn’t worth the risk.
In addition to collateral, some banks require new borrowers to have a cosigner. A cosigner is someone with good credit who agrees that they will pay the loan if you don’t. Often, this is a relative. Having a good cosigner can also help you get a better rate on personal loans.
Of course, once you have received the loan, you will want to make sure that you make all payments on time or early. Credit bureaus keep records of every payment you make, and use it to determine your credit score. If you routinely make your payments ahead of time, it will reflect well on your credit score. If you are frequently late, or miss payments, it will reflect negatively on your credit score.
The credit bureaus can be your best friends, as long as you keep on top of your payments and pay attention to your credit scores to ensure that all of the information they record is accurate.
Pay off your personal loans on time, or slightly early. Don’t pay them off too early, as this may cause banks to view you as unprofitable, making them hesitant to do business with you. Do pay all loan payments before they are due, though, and soon you’ll find your credit score climbing off the charts.

How to Get Out Of Debt Fast

There are all sorts of folks out there who want to tell you how to get out of debt, and how to do it fast. Some of them want you to declare bankruptcy. Some of them want you to use their credit counseling or credit repair service. Some of them want to tell you that you need to take all of your debt and consolidate it into a personal loan that has a lower rate of interest.
Some of these plans work. Some don’t. Everyone’s situation is, to say the least, different. Still, there is a foolproof process that you can use to get out of debt:
Pay your debt off.
It sounds simple, of course, and it’s much easier to say it (or type it in bold letters) than it is to do it in the real world. Still, that’s really what’s at the heart of getting out of debt: paying it off.
If you have at least enough money to meet your basic needs and some money left over each month, you’re ahead of the game. If you don’t, you need to figure out a way to reduce your expenses, increase your income, or both.
If you don’t have enough money coming in, you can’t pay off your debt.
That’s the problem that many people face. They want to pay off their debt, but they don’t have money enough coming in to actually do it. To really pay off your debt for good, you need to increase your excess income.
Now, reducing expenses can go a long way toward increasing your excess income, of course. If you can be more frugal, you won’t have to earn as much extra money in order to make things balance out.
You need to do more than just make things balance out, however. You need enough income to snowball your debt away. What does that mean, exactly?
You get rid of debt by paying it off, consistently, every month.
Even when you’ve paid off a credit card, you don’t pay less on your debts. You take the money you were sending to that credit card and you send it to the next credit card, or to a personal loan. Your debt payments, in effect, create a “snowball” that will have you out of debt in no time at all.

When You’re Stuck in Personal Loan Hell

Personal loans can be useful for a great number of purposes. You might be able to use a personal loan to make an important purchase, pay for a vacation, help a child pay their tuition for college, or even consolidate higher-interest debt like credit cards. Personal loans can sometimes be a real blessing.
At other times, you can feel like you’re stuck in personal loan hell. How does this happen? There are a couple of possibilities.
The Myth of Debt Consolidation
So, someone has talked you into consolidating all of your credit card bills into a lower-interest personal loan. While that may seem like a good idea, and while it may help you get a handle on your financial situation for a little while, the fact of the matter is that it can be dangerous.
Why is that?
Well, there is a reason you accrued all of that credit card debt in the first place. Chances are you like to buy stuff. You want to buy stuff. With your credit cards all paid off, there’s nothing at all to stop you from buying more and more stuff.
Within a few months, or maybe a year at the most, you find yourself twice as far in debt. You’ve maxed your credit cards out again, and you still are making payments on your personal loan.
Still think that personal loan was a blessing?
When Your Circumstances Change
So, let’s say you used a personal loan to buy a boat. Forget the credit cards for a few minutes. That’s great! Unfortuantely, the housing market collapses, which leads to the financial industry collapsing, which leads to the auto industry collapsing, which puts you out of a job.
If I’d have said that a few years ago, you’d have thought I was being a worry-wart. Yet, it’s the situation many folks find themselves in.
So, what happens? Well, you’re barely making your house payment, and you stop paying on your personal loan altogether. The bank comes to get their collateral, and they don’t give you anything in return for it. You’ve paid on that boat for 3 years, and only had a dozen payments left.
Too bad. You’re screwed. You’re in personal loan hell.
What’s the moral of the story here? Take out a personal loan if you need to, but recognize that, just like with any other kind of credit, you’re putting yourself at risk.

Personal Loan Land Mines

Like other kinds of credit, personal loans can be a mixed bag. They’re not quite like a home loan, which is almost always good because it gives you a lot of money at a low rate of interest. Personal loans can be a good thing, but they can also be a bad thing.
There are some important things to watch out for when you take out a personal loan, to make sure it’s worth it:

• Be sure you can pay it. If you can’t make the payments on a personal loan, you’re going to have problems. If it’s a secured personal loan, such as a loan that you use for a  car or boat, the lender can repossess the property. Whether it’s secured or unsecured, not paying it can really screw with your credit.
• Watch out for personal loans from family and friends. Yes, these can be a good thing. But if it doesn’t go well, you can mess up everyone’s Thanksgiving dinner with a heck of a lot of bitterness and anger. Think twice before asking family or friends for a personal loan, and even then go about it the right way.
• Paying cash is better. There are only a handful of situations in which taking out a loan is better than paying cash, if you have it. A home loan, as we mentioned, is one of those. But for the most part, the meager interest you would earn on leaving the money in a savings account combined with the interest you’re going to pay on the loan just makes it a better thing to pay cash.
• Be careful of debt consolidation. You might take out a personal loan to pay off a bunch of credit cards. While that can be a good thing, the danger is that you’ll go out and max out your credit cards again. If you use a personal loan to pay off debt, put safeguards in place to make sure you don’t just go out and accrue more debt.

Why it’s Better to Pay Cash

So, you’ve finally arrived. You’re at the point in life where you actually qualify for (and can afford) credit. Your score is over 700, and you’re rocking. Everywhere you turn, someone offers you a credit card or a personal loan, and you’re more than willing to say “yes, please!”
Still, there are compelling reasons why you should sometimes say “no.” Credit is nice to have, but it’s not always nice for you.
Here are some reasons why it’s better to pay cash if you can:
Paying cash means no interest charges. Well, duh. It’s basic, but many people opt for the convenience of credit instead of just paying cash. They fully intend to pay off the balance, but they don’t and then wind up paying interest charges.
Patience is a virtue and it builds character. OK, let’s say you are considering a personal loan to buy a boat. Now, it’s June, so you’re really just on the cusp of the summer boating season. You know you’ll be able to save up enough money to buy that boat in 3 months, but by then it won’t be boating season.
So, you go down to your bank and get a personal loan. Over the life of that loan, you’re going to pay another $3-5 grand in interest, depending on how much the boat costs. If you can wait just one more season, you can pay cash. No, it’s not easy being patient, but it does pay off.
Credit is designed for purchases that you can’t pay cash for. Most folks, no matter how much they save, aren’t going to be able to pay cash for their home. That’s why home loans are important, and that’s why most people use them. On top of that, your home is an investment that may, in the long run, be worth more to you than what you pay on your home loan.
But just about everything else can be bought using cash. Yes, there are some items that you can’t wait to save up for (such as a car). But anything you can pay cash for you ought to.

Conquer Credit Card Fees

"Flag raising on Iwo Jima." Joe Rosenthal, Associated Press, February 23, 1945. National Archives and Records Administration (ARC Identifier: 520748).

While there is talk in Washington of trying to create new regulations about exactly how much credit card companies can charge you in interest fees, the fact remains that some credit card companies just seem out to get their customers in trouble. The interest rate on some credit cards, especially if you miss a payment, can skyrocket. You can find yourself with an interest rate that’s quickly approaching 30 percent if you’re not careful.
This, obviously, creates a bit of a problem. You wind up accruing so much in interest charges and late fees that your credit card debt grows and grows rather than shrinking. Eventually, if you’re having trouble making the payments, it will even affect your credit score.
One way to get rid of those high-interest credit card fees is to simply pay off the credit cards. Obviously you can’t just pay it off from your checking account. If you could, you probably wouldn’t have used the credit card in the first place.
A personal loan can be a great way to reduce those fees. You can take out a personal loan from your credit union, bank or other lender for the purpose of paying off other debt. This kind of a personal loan is often known as a “debt consolidation loan.” In many cases, the lender may be willing to send the payments directly to your credit card companies, reducing the possibility that you’d spend the money elsewhere.
There are a number of different types of personal loans out there. There are unsecured personal loans, for example. These kinds of loans don’t use any collateral as a security for the loan. As such, the interest rate on an unsecured personal loan is likely to be higher than some of the other types. Still, it’s also likely to be less, probably much less, than the interest rate on your credit cards.
Secured personal loans may be a better bet, if you can get one. A secured personal loan requires some sort of security – usually a home or property – to back the loan. In the case of a home, this type of loan might be referred to as a “second mortgage” or a “home equity loan.” These loans will have a lower interest rate than an unsecured personal loan, and will save you the most money in fees overall.