Prior to the 1970’s, there were fewer alternatives available to consumers for credit options. There were federal and state regulations that restricted the kinds of lending the financial institutions were permitted to do. With the 1970’s and 1980’s, major changes took place with financial deregulation.
Today, there are a host of innovative credit alternatives available to consumers. Some have interest rates that are fixed and some are variable. Some loans require collateral and others are made on your promise of repayment alone.
Installment credit is the type of loan utilized usually when purchasing a car, appliances or a motor home. This is also called closed-end credit. Each month you make your payment, the principal of the loan is reduced. Open-ended credit or non-installment credit refers to single payment
loans and also to loans that allow you to make irregular payments and to borrow more without reapplying.
The open-ended credit refers to charge accounts and credit cards. Most credit cards allow you to borrow interest free if you pay your balance in full each month by the due date. The disadvantage of credit cards is the temptation to have too many, overspend or make only minimum payments which will put you into credit troubles.
A home-equity loan uses your equity in your home as collateral for the loan. Usually, these loans are for up to 75% of your home’s appraised value, less the amount still owed on the first mortgage. The advantage of this kind of credit is that it allows you to borrow at a competetive rate. The
disadvantage is for the individual who lacks self discipline for spending. They will be more likely to overspend. If a person is unable to meet the loan payments, their primary residence is at risk.
Other sources of credit include commercial banks, savings and loans, credit unions and consumer finance companies. Before initiating any kind of loan or credit, research your options to determine which avenue is best suited for your situation. Identify the loan you prefer based on your particular borrowing requirements and ability to make payments.
We all know that in order to get the best loan rates, mortgage rates and general loan rates including car loans, you need to have good credit and be deemed a good risk so that the lender will place a higher value on your business (they know you are more likely to pay them back, and in a timely manner if you’ve established a good credit history).
So, the next few posts are going to be on what you can do to establish and maintain good credit, so that you pay a lot less in the future for both long term and short term loans, mortgages and credit cards. I have to admit, I’m going to have to do a little investigating, as my knowledge in this area is just about the same as the average joe on the street.
There are some ways to building good credit that aren’t all common sense, or common knowledge for that matter. We’ll discuss those in the coming days.
In a process that is going to span a few years, and take place in increments rather than all at once, the Federal Reserve, under the new chairman Ben Bernanke who replaced Alan Greenspan, will take the rate hike in increments, with meetings in between to determine the next step and next interest rate hike.
What does this mean for us?
It would mean an increase in interest rates on borrowed money for millions of consumers and businesses as commercial banks make the same adjustment, which is a quarter-point jump in the prime lending rate, pushing it to 8 percent.
Some economists and financial experts believe the Federal Reserve will stop with the funds rate at 5 percent, which is significantly higher than the forty six year low of 1 percent, which was in effect before the rate increases even began.
Hello everyone. I’m glad you’ve found this site. I have put this weblog together because almost everyone I know is struggling with debts that seem to be out of their control, and credit card companies just seem to be increasing interest rates, as well as loan rates and mortgage rates. With all of this against us, how can we ever get ahead?
That’s what this weblog is all about. I’ll share with you my personal journey from drowning in credit card debt to getting every cent of that debt cleaned up and paid off. Also I’ll share with you how to find the best credit cards with the best interest rates, and how to also budget your spending and strategic ways to pay your bills so you pay yourself first - not the mortgage companies, credit card companies and loaning banks.
So welcome, and I hope you learn a little something here!