Credits

Friday, September 22, 2017

Why You Need to Understand the Different Types of Loans Available to You Before Putting Pen to Paper

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Almost every mother has experienced hard times, when cash is running low and you end up emptying the piggy bank to tide you and your little ones through to the next paycheck. Many of us turn to lending in times of need, which can be an extremely beneficial decision, or can backfire and become something that we regret. To avoid complications and problems, you need to ensure that you are completely aware of what you are signing up for before you put your pen to paper and sign for the loan. Here’s how to ensure that you fall into the first category when it comes to borrowing money, no matter how large or small the amount.

Understanding Different Types of Loans 

There are numerous types of loans available out there, and it’s essential that you can differentiate between one form and another. What’s available to you will largely depend on your financial position and history. If you have a good credit score, you may be able to access lower interest rates and certain perks and deals. If you have a negative credit score, you will have to go with options that have higher interest rates and larger minimum payments. Keep an eye out for a signature.loan (otherwise known as a character loan or good faith loan), as this will simply require a signature and can often be approved online with an e-signature. If possible, try to avoid payday loans as they have astounding interest rates and can be extremely difficult to clear. numbers-money-calculating-calculation.jpg
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Managing Repayments

Once we’ve received the money and are back on our own two feet, it can be easy to forget that you need to repay the full amount back plus interest. A large percent of the time, people will slip back into their old habits when really they should be cutting back on non-essentials in order to have the spare cash to repay their dues. So, once your wages do come in, budget. Work out how much you need for necessities. Cut back on nonessential items and put the rest of your disposable income towards paying off what you owe. If you miss repayments, you will be charged fees and fines and your credit score will also be negatively affected, discouraging lenders from helping you out in the future. If you find that you are struggling to meet repayments, don’t bury your head in the sand. Contact your lender and they may be able to reduce your minimum payments or even offer lower interest rates. You should also alert your lender to any changes in your personal circumstances that could potentially affect your repayments. If they are unaware of difficulties, they can’t offer assistance.

Once you have cleared your debt, there are plenty of ways to avoid finding yourself in such a difficult situation in the future. The first? Effective money management. Create a budget and stick to it. Be of the mindset that if you can’t afford something, you can’t have it or will have to wait until you can afford it yourself. You can also start a savings account. Depositing even small amounts in this from one paycheck to the next will result in a slowly growing source of funds that can be used in times of emergency or saved for a rainy day later down the line.

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