Guest Post: Tips to Smarter Borrowing

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Make Sure to Learn These Tips Before Borrowing

There are many ways to get credit or borrow money. However, the cost of each kind of borrowing varies tremendously, so it’s well worth it to spend time figuring out which kind best fits your needs at the time.

Ways Of Borrowing 

There are plenty of ways you can borrow money. For instance, you might take a loan out, apply for store credit or a credit card, or even make overdraft arrangements. Before you choose how you are going to borrow, you need to have an idea how much you want or need to borrow, as well as how long you are going to borrow it for. Then you can look over the options available to you.

 

Bank Overdrafts

Bank overdrafts might prove a convenient method of borrowing if you’re only needing small sums of money for short lengths of time. Overdrafts offer flexibility in relation to other forms of credit since you can use overdrafts at any point that you need them, borrowing as much as you need, so long as you’re underneath your overdraft limit. Just keep in mind that your overdraft ability is something your bank can reduce or even take away any time they like. Also, the interest rates charged can be quite variable, so they might rise or fall at any point in time as well.
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Overdrafting comes in two forms:

Arranged or authorized overdrafts happen when and the bank collectively agree to a borrowing limit. You might face daily or monthly fees for the overdraft, as well as obligations to pay interest on the overdrafted amount.

An unauthorized overdraft is where you can overdraft past your limit without the bank’s consent. The charges your bank levies for unauthorized overdrafts are going to often by substantially more than for an authorized overdraft.

 

Loans

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If the sum you need to borrow is bigger and for longer, than you might find a loan more suitable. Banks and building societies are among the many financial organizations that offer loans. You normally don’t have to be a current customer in order to apply.

Loans come in two forms: 

 Unsecured loans are a kind of loan where you the amount you borrow, the rate of interest, and the loan time period are all fixed or set. Should you make all your repayments on time, then you will repay the loan in full by the end of the term. Those repayments would cover what you borrow plus accrued interest. If you find you might be able to pay off your loan early, you do need to check with your lender about early payoff charges. Many lenders rely on such loans as investment or income vehicles, so they might actually have fees against those paying off early.

Secured loans let you borrow money using something as collateral. In many cases, this might be your home or car. In a pawn shop, it could be whatever item of value you bring in for them to hold. If you don’t keep up with your repayment schedule, you can lose your collateral, even if it’s your home. The lender would sell it to recoup the money they lost. You can also get a guarantor loan, where the guarantor puts up their collateral in turn for you getting a loan.

 

Credit Cards

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A credit card lets you borrow money so you can pay for services and goods. Your card comes with a credit limit. The card provider bases this limit on existing debts, your current income, and how you have managed credit previously.

You won’t face interest if you pay your full credit card bill every month. If you happen to not pay the full bill each month, then you face interest accrued on any outstanding balance. Average credit card interest rates hover around 18 percent. The normal credit card interest rate is going to be higher than you would see on a personal loan, but the amount you borrow and then repay every month is variable.

Sometimes you can open up a new credit card account and transfer your debt from an older card, freezing the interest for many months. Having said that, if you don’t pay down that debt or do another transfer before the 0 percent interest period ends, you’ll face the new interest rates involved.

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