12 Tips To Use Your Smart When You Borrow Money

Saturday, August 17, 2013, 1:00 AM | Leave Comment

Almost everyone borrows money sooner or later from financial institutions. There is always some interest attached with the principal when you payback. You must realize that the interest you pay on mortgage, credit cards, and personal loans is your expense.

Therefore, you must try to lower that expense by doing research how to get loan with lower interest rate.

One of the best ways to get lower rate is to Take steps to improve your credit score. Then follow the below steps to manage your debt that was created when you borrowed money:

  1. Pay off your highest-rate loans

    Pay off your highest-rate loans with funds from your lowest-yielding savings and investments. Repeat for all your credit cards.

  2. Consider keeping just one or two cards

    When you are done with paying-off all, consider keeping no more than two cards – the ones with the best combination of rates, fees and features to suit your needs.

  3. Pay all or as much as possible of your credit card bill each month

    Avoid bigger interest charges by paying all or as much as possible of your credit card bill each month.

  4. Don’t be late more than 30 days past due

    If your payments become more than 30 days past due, your lender may report this delinquency to credit bureaus. This information can remain in your credit file for seven years and make it more difficult or more costly to obtain credit.

  5. Think twice before using your credit card for new purchases

    If you are having serious debt problems, think twice before using your credit card for new purchases. Instead, consider paying with cash, a check or a debit card.

  6. Think twice before using your credit card for cash advance from an ATM

    Remember that when you use your credit card to get a cash advance from an ATM, that’s considered a loan, and you will incur interest charges immediately, and maybe even transaction fees.

  7. Review interest rates and terms of existing loans

    Review interest rates and terms of existing loans to see if you can do better. Ask your credit card issuer about a reduced interest rate, a more favorable grace period, or other features that can cut your costs.

  8. Refinancing your home mortgage

    Refinancing your home mortgage at a significantly lower interest rate also can greatly reduce your monthly payments. Be aware of the impact of loan origination fees and other costs. Many people also don’t think about refinancing an auto loan or a student loan, but those can be other places to cut monthly payments.

  9. Consolidate high-rate loans into one new loan with a lower rate

    If you have equity (ownership) in your home, you can get a home equity loan to pay off credit card debt, consolidate several existing high-rate loans into one new loan with a lower rate, or raise cash in an emergency.

    Your interest payments on home equity loans also may be tax-deductible. Beware because your home is the collateral backing the loan, if you can’t make the monthly payments, you could lose your house.

  10. If you are 62, reverse mortgage can be a good option

    A reverse mortgage is another type of home equity loan for people age 62 or older, and it, too, comes with certain risks and rewards. With a reverse mortgage, a lender will pay you money in a lump sum, monthly advances, through a line of credit, or a combination of those options. Find out if reverse mortgage is good for you.

    But remember, the loan eventually must be repaid, so you will be reducing your equity in the home’s value, perhaps substantially, after you add in the interest costs. Consult with your family as well as an attorney or another trusted adviser before agreeing to a reverse mortgage.

  11. Obtain and correct credit reports

    Get your free annual credit report now.

  12. Monitor your credit files

    Ensure the accuracy of your credit information and monitor your credit files for signs you may be a victim of identity theft. Under the law, merchants must notify you if they plan to report negative information about you to a credit bureau.

In a Nutshell
Interest payments on credit cards, home mortgages and other loans are an expense, so think about what you can do to keep these and other borrowing costs down.

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