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Personal Loans: Things To Consider - Part 2

Getting approved
Your best approval strategy is to get steady employment and improve your credit score. Assuming you have avoided bankruptcy, once you accrue a year's worth of on-time payments to all creditors, your score will take a healthy leap.

In addition to your on-time payments, another strategy to get your score up is to get approved for a smaller debt for a shorter time. Demonstrate your ability to pay. Consider saving to make a larger down payment. A larger down payment means you have less to borrow and demonstrates to the lender that you have had the patience and discipline to set money back for a significant purchase. These actions show off your financial credibility

It's always important to be informed! Once you have settled in on your best option, read all the fine print. You'll want a fixed interest rate to avoid a potentially crippling rate hike.

Avoid applying for multiple credit cards. Your credit score takes a hit every time you apply. Also, avoid borrowing more than necessary. Credit card and home equity lenders may offer you a greater line of credit than you need for your current expense. Taking advantage of such an offer is seldom a good idea.

Just because you can borrow doesn't mean that you should. If you find yourself constantly borrowing to meet your financial needs, it might be time to review your spending habits and other potentially harmful patterns in your financial behavior. In some cases, it might be better to avoid borrowing altogether: For example, if your credit score is low, try to avoid accruing unnecessary debt for purposes of comfort, convenience, or status.

Learning Lender Language
ARP (annual percentage rate) - This number tells you the interest rate you will pay on any outstanding debt. Rates vary from around 6% on home mortgages to 400% on payday loans.

Collateral - This is the asset that you offer your lender to guarantee that you will pay up or surrender your property. Houses and car titles are collateral.

Default - Failure to repay a debt on time places you in default and bottoms out your credit score.

Hidden fee - A cost that the borrower is not expecting may be called a hidden fee, which may, in turn, impact the overall expense of borrowing.

Payment plan - The schedule that a lender provides for repayment outlines the amount of money due at different dates over the life of the debt.

Personal Loan - Financing that helps you meet your immediate expenses is also known as a signature loan, meaning your name is your promise to pay.

Outstanding debt - The unpaid portion of your debt is the balance still owed to the lender.

TAR - The Total Amount Repayable will give you the bottom line on your loan because it includes your principal, plus fees and interest. TAR is a top consideration for any planned borrowing.

Financial advisors agree that taking on debt is a serious matter. Quality financial advice is readily available for those who want to evaluate the best way to handle their expenses, so make sure to review all the relevant information and consider all your options carefully before you commit to a decision. Borrowing is a significant risk, and you need to know the difference between what sounds good and what's right for you.

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