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If Borrowing Is Inevitable, Be Smart About it

by Jim ONeil on April 23, 2012

in Personal Finance Tips

Unless you have received a financial windfall, you will probably need to borrow money at some point. Homes, higher education, and even automobiles are expensive these days and most people cannot afford to pay for them with cash. Whether or not to borrow is no longer the question.

It is about learning when the time is right and how to accomplish it. Borrowing for planned reasons like home improvement or repairs can be quick and painless if you take the right approach.

When short-term credit is needed, use a credit card and repay the balance in full by the end of the statement period to avoid an interest payment. Consumers with excellent credit may qualify for an introductory zero percent interest period of up to 18 months.

If you need to borrow cash, compare interest rates for credit card cash advances with payday loans APR to see which are less expensive. The goal should always be to get the best deal and repay the money as quickly as possible.

Unless you cannot repay credit card balances in full, avoid using zero percent interest balance transfer offers from credit card providers. These simply shift debt from one card to another. Repay the debt immediately rather than prolonging the situation.

If you must use a balance transfer, select a card that offers a long interest-free term so you can repay the balance before the interest kicks in.

If you have savings, there is no need to borrow. Interest rates on savings accounts are extremely low but interest rates on credit cards are in the double digits. Unless you manage to secure a very low credit card or mortgage rate, use your savings to pay for items.

Anyone with unwanted goods should consider selling these for extra cash. It is easy to sell items through online auctions and there are special websites for selling mobile devices.

It may be difficult to qualify for loans bank offered if you have a low credit score. A limited time, zero percent interest credit card may be an option for some people. However, others will need to explore no credit check loans that offer competitive interest rates and are affordable to repay within the initial term.

Avoid rolling over payday loans because the interest and other charges that accrue will increase the debt.

When searching for the loans cheapest to them, consumers should be aware of the meaning of “representative APR.” A lender is only required to provide this rate to 51 percent of accepted applicants. Most providers only reveal the actual APR after a loan application is submitted, which places a mark on the credit file of the applicant.

In a true emergency, crisis loans are available to anyone, subject to savings caps. Budgeting loans are available to benefit recipients for a wider range of purchases. Payday loans can also meet short-term, emergency cash needs. Though loans APRs seem outrageously high, the financing is designed to be repaid within several weeks, drastically reducing the interest charges.

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