Shop wisely and read the fine print
As the season for gift shopping is now in full swing – consumers may not be aware that shopping for credit should be given the same attention as shopping for anything else – look for bargains. Keep in mind there are plenty of places to “buy” money from – credit unions, trust companies, banks, finance companies, retailers, life insurance companies, credit card companies, and the most expensive of all – the payday loan advance companies.
Interest rates and lending conditions will vary widely with each lender and it is in your best interest to know all of the details before you sign on the dotted line. Be an informed consumer – know all of your options before you make your purchase of “credit”.
Your ability to borrow money may depend on your past financial history – if you have one. The lender will look at several things before granting you credit:
- Character – have you borrowed money before and repaid it as agreed? If your credit rating is less than “perfect” – be prepared to explain. Remember, your credit rating is not a measure of your personal worth – it is a credit industry tool. Nothing more.
- Capacity – Do you have the income to support the repayment of the debt? Is your employment secure? How long have you been on the job? Do you own or rent your home and how long you have lived there.
- Collateral – Do you have assets that could be used to repay the debt if you are not able to?
Some lenders also use internal and external credit scoring points. Points are gained by the use and repayment of credit. Points are lost every time a potential lender does an inquiry on your credit file. So do not apply for credit that you do not want. Doing so will only hurt your credit rating by lowering your credit scoring points.
Always maintain a debt free account. A debt free account is an account in a financial institution that you do not owe any money to. That way you will remain in control of your money. Do not let a lender talk you into moving all your financial dealing to one place. Keep your options open at all times.
Determine what type of money you want to borrow before you fill out an application. Some examples are – a car loan, an overdraft (which is the bank’s name for a payday advance) a line of credit, a credit card, or a mortgage. Visit your financial institution and speak with a lender – ask about the various types of credit services they provide and the complete cost of those services. Then visit at least two other financial service providers to see what they can provide and what their costs are. Shop for the best deal, just because you have always dealt with one financial institution does not mean this is the best place for you.
Do not apply for credit until you have researched at least three different service providers – this may mean that you will go to a bank, a trust company and a credit union, as these providers are usually the cheapest.
Handle credit with care
Once the decision to borrow has been made:
- Don’t sign any agreement before you have read and understood it. If you do not understand – ask!
- Be sure the lender has explained things to your full satisfaction before you sign.
- The lender is not doing you a favour or lending to you because they like you, this is a business decision and you are the customer. Many times I have heard people say they were afraid to ask – don’t be – you are the customer –“the customer is always right”! So ask.
Making a list
Be aware that some finance companies may ask you in the course of conversation about your personal goods or household goods, then they will make a list and use them as security against your loan perhaps without you fully understanding that is what is being done.
So ask questions! Why does this person want to know if you have a TV, a VCR, a couch and more – it has nothing to do with your loan application unless of course they are going to use it as a collateral for their loan. Then, if you do not or can not pay, they will threaten to repossess your household goods. So be careful! Do you really want the loan that badly?
Payroll loan advance companies.My professional advice is STAY AWAY! If you are already involved with them and want to get out contact Solutions we can help you stop the cycle of debt and stop them from getting at your wages. Yes, we can help!
Shopping for credit should be as much fun as shopping for your gifts – this is a gift you will give to yourself for years to come – so this holiday season, shop wisely and read the fine print.