Month: March 2019

7 Facts About Interest Rates You Should Know

Whether are getting a small short-term loan or a mortgage, your interest rate is going to be important. There are certain things that you need to learn about interest before you borrow any amount of money. The average person doesn’t actually know all that much about interest, and this lack of knowledge can cause devastating results. This article will provide you with some of the most crucial facts about interest that will benefit you in the future.

  1. Credit Cards Come with Multiple Interest Rates

As strange as it might seem, your credit card has numerous interest rates attached to it. There is a different rate for cash advances, purchases, balance transfers and other things. It is important that you know what exactly these rates are. This way you will know what you can expect to pay overall. Some things can be more costly than others when it comes to using a credit card, and this is the reason.

  • Interest Rates Can Change

Interest rates are subject to change, especially with a credit card or variable rate loan. While the introductory rate of your credit card may be 0%, it won’t stay that way forever. Once that introductory period has passed, you will have to start paying something on top of the principal. Variable rate loans can help you save money, but you never know whether your rate will increase or decrease. Fixed rate loans are the safest, but you could end up spending more overall.

  • Your Credit Affects the Rate You Get

Your credit is a major contributing factor when it comes to the interest rate you get. Those with high credit scores usually get the lowest rates. While it does depend on the type of loan, this is usually the case. If you don’t have very good credit, you should work on improving it as soon as possible. It is never too early or too late to start doing this. If you are interested in getting a loan, take a look at your credit reports first. This will give you a better idea as to what kind of rate you should expect to get.

  • Interest Rates Increase for Many Reasons

We have already established that increase rates are subject to change, but it happens for a number of reasons. Banks can just suddenly design to raise everyone’s rates, but there are lots of other possibilities for a change in your rate. If you are late on paying back your loan, you should be charged what is known as a penalty interest rate. This can make it even more difficult to pay back the money you have borrowed. You need to know when your loan is due so you don’t end up with a lot of extra fees.

  • It is Possible to Negotiate Your Interest Rate

There is a good chance that you can get a lower interest rate on your loan or credit card through the art of negotiation. In fact, many lenders expect borrowers to haggle with them over the interest rate. It is important that you take a careful and considered approach when negotiating with a lender over your rate to get the best results. While not all lenders are open to negotiating, many of them will be.

  • A Shorter Loan Term Can Reduce Your Interest

If you want to pay as little interest as possible on your loan, you should opt for a shorter term. The idea of not having as much time to pay off your loan can be a little intimidating, but it’s usually for the better. The shorter your term is, the less you will have to pay in the end. Those who are getting a mortgage will definitely need to keep this in mind. Try to aim for a 15 year term instead of 20. This can save you a surprising amount of money overall.

  • It’s Possible to Lower Your Interest Rate Mid-Loan

Those who already have a loan can lower the interest rate on it through a number of methods. Refinancing is probably the most effective way to do this. It basically involves taking out another loan with a different lender to replace the loan you currently have. If you have improved your credit since getting the original loan, you could get a lower rate with the new one.

The more you learn about interest rates and how they affect you, the easier it will be to borrow money without regrets. This knowledge can be a very powerful weapon in combating long-term debt and other financial problems. Most people don’t give interest rates the respect they deserve, and as a result they get stuck in debt for years. You need to consider all of these things before borrowing any sum of money.

Credit Card Myths That Could Hurt You Financially

There are certain myths about credit cards that you need to know about right now. Those who don’t have all the facts can quickly get themselves into a lot of trouble financially. Whether you already have a credit card or want to get one, this information is very useful. We will take a look at some of the most common misconceptions about this form of borrowing. The more you know about credit cards, the easier it will be to use them to your advantage.

Credit Cards Keep People in Debt

Those who misuse or abuse credit cards often end up in debt for years, but they can very beneficial when used responsibly. The fact is that you don’t have to end up in crippling debt for a long time. You just have to make sure that you don’t use your credit cards unless you really need to, and always pay your bills on time. The main reason why people end up in credit card debt is because they spend money recklessly with them. You should always think about whether or not it is a good idea to use your credit card each time. This will help you avoid being saddled with significant debt for many years.

Maintaining a Balance on Your Account Improves Your Credit

Some people wrongly believe that maintaining a balance on your credit card will steadily improve their overall score. The truth is that paying the minimum on your card will actually inhibit you from raising your credit rating. You should always try to pay off your balance before you even get your bill. Carrying a balance on your account can most certainly work against you, especially if you fail to clear it on time.

If you can’t afford to pay off your balance in full by the due date, take care of as much of it as possible. It’s never a good idea to not pay at least the minimum amount on your card. This is precisely how a lot of people fall behind and end up in debt for a long time.

You Should Never Have More Than One Card

Another common myth about credit cards is that it’s never a good idea to have more than one. If you feel like you can be responsible with multiple credit cards, it can be good to have them. Just make sure that you find the right ones. There are lots of different credit card options to choose from. The cash back rewards alone are enough of a reason to consider doing this. You don’t want to get a new credit card just to have one, but there are benefits to think about.

Getting a Credit Card Hurts Your Credit

It’s true that getting a credit card does lower your score by a few points, but it’s nothing serious. If you already have at least decent credit, this is nothing that you should worry about. Even those with bad credit will need to keep in mind that having a credit card can help one’s credit. You just need to make sure that you pay the balance on your account in a timely manner.

Avoid Credit Limit Increases

Too many people are scared of accepting credit limit increases because of what they think it will do to their credit. You will obviously still need to be responsible with how you use your cards, but this increase can work to your advantage. You’ll be able to spend more money with your card, which can be advantageous when you have an emergency expense. It’s always better to have the option than not.

You Need Credit Cards from Each Company

If you really think that you absolutely need a credit card from each of the major companies, think again. These days most businesses accept any major credit card. You might occasionally run into a place that only accepts certain credit cards, but it’s pretty rare. You can certainly get one of each, but just know that it is not a necessity.

It’s Okay to be Late on Your Credit Card Bills

It’s never okay to be late on your credit card bills for a number of reasons. You will incur some steep late fees, and your credit will suffer as a result. Anyone who uses a credit card should take this seriously. Adopting a carefree attitude about paying these bills will inevitably land you in trouble.

Credit cards can be incredibly helpful or harmful, depending on how you use them. These misconceptions can do a lot of damage to your credit and finances, which is why it’s so crucial to know the truth. If you want to maintain your financial freedom long term, you will have to keep all of these things in mind.