3 BIGGEST MISTAKES PEOPLE MAKE WHEN PAYING OFF DEBT

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The decision to get yourself out of debt is a life changer, if you are willing to make the necessary commitment that goes with that.

Getting out of debt involves more than just paying off a few credit cards. It means changing spending habits; learning to how to budget; knowing who and how much you owe; prioritizing debts; creating emergency and retirement funds; and knowing where to find help when you get off track.

In other words, there are a lot of decisions that need to be made.  It’s also likely that you’re going to make some mistakes along the way. Here are a few of the most typical, and how to avoid them.

1. Mistake: Never changing you spending habits.

We’re all creatures of habit – and spending money is no exception. We shop in the same stores, drive the same car and even eat the same restaurants because it’s what makes us comfortable.  What you don’t realize is it’s also costing you more than you can handle financially. Remedy: If you won’t change your spending habits, you won’t ever get out of debt. Start with your morning habits (have your coffee and breakfast at home). Start packing your lunch. In the evening, watch games or movies on TV, while eating a home cooked meal. You will see an immediate impact on your daily spending habits. You don’t have to do without….you just need to make smarter choices with what you do.

2. Mistake: Signing up for a debt-relief program, but not understanding what is expected.

It is rare to get a quick-fix solution to debt problems. If that is one of the promises you hear, start looking elsewhere. Remedy: The first thing to understand is that debt-relief programs typically take 24-48 months, so be patient. Second, check up on the whatever company you choose for debt relief. They should be A rated by the Better Business Bureau and have positive user reviews certified by Trust Pilot. They should be a business that’s been around for at least 5 years.

3. Mistake: Trying to dig out of debt alone.

People are reluctant to ask professionals for help dealing with debt. Remedy: Call a credit counseling agency like ASSURE Financial Services and get free help from experts. Accredited Debt Relief credit counselors are trained and certified by their organizations. They can suggest debt-relief solutions like credit consolidation and debt settlement. The credit counselors advise you on creating budgets and recommend a solution that you can take or leave. And, it’s free! Take advantage of that.

HERE ARE SIX TIPS TO KEEP SUMMER TIME SPENDING UNDER CONTROL

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Summer isn’t for saving; it’s the season for spending. At least, that’s the message that many Americans relay when banks trot out their annual spending surveys.

For those of us already in heavy credit card debt, the summer offers many temptations to break out the plastic.  The key is to spend smart, and save where possible.

Whether you’re spending on canoes, landscaping or vacations, here are some of the common spending traps summer sets for us — and how to mitigate them.

Yard maintenance

If you do your own landscaping and lawn care, you’re going to save money. That being said, if you absolutely do not want to cut your own grass or ruin your shoes by aerating the lawn with your high heels, consider hiring a neighborhood teen.  Place an ad on-line, in a neighborhood forum, or at your local convenient store.  Teens are always looking to make some summer spending cash.

Big stuff for your big summer fun

Seasonal items such as patio furniture will go on sale later in the summer; however, your choices will be limited by what is left in stock. If you’re looking for bigger ticket items such as water skis or furniture, consider buying it used. This past week, someone just sold a fantastic glass patio table, umbrella and six plush chairs for $190 on my local Bidding Wars Facebook group.  And don’t forget to comb the house for things that you can sell yourself to recoup some cash.

Summer camp for kids

Camp is not cheap. It can be more expensive than daycare.   The first thing to do is determine how much you can spend to send kids to camp. Then decide, with your kids, where and how to divide that sum. (Don’t forget to budget for extra gear, etc. that you may need for the camp.)

To save you money, some camps offer a siblings discount, so consider sending your kids to the same camp. Also, many have early-bird or return-camper discounts. If you can’t afford the entire cost up-front, ask if the camp has a payment plan. Some camps have subsidy programs with financial applications due earlier in the year.

Vacations

The key to saving money on vacations is planning.  Search for resorts or hotels or restaurants that offer free promotions for kids. Do a Google search for Groupon deals or coupon codes for local attractions. Consider visiting hot spots such as Arizona or Florida, which can be cheaper in the summer months, or explore your own country. Opt for a road trip and find accommodations with a kitchen through Airbnb, VRBO or Homeaway.com.

Staycations

People think that by doing a staycation, they won’t be spending money. You need to have a budget for this as well. Keep a calendar of events that you want to enjoy with the family and the associated costs.

Making memories with your people

Barbecues, concerts, weddings — the events add up, but making lasting memories doesn’t have to mean creating lasting debt. It’s about making choices: saying “no” to something so you can say “yes” to something else.

Also, it’s never too late to start saving for your good times. It could be as simple as putting aside every $5 bill you see in your wallet for patio drinks. Even better, set up an automatic transfer of cash every payday for your summer expenditures.

YOU’VE BECOME DEBT FREE…NOW WHAT? FINANCIAL MOVES THAT MAKE SENSE

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When you’re focused on getting out of debt, most folks get caught up in the process and don’t think beyond achieving that goal.  If this happened to you – don’t worry!  It’s happened to almost everyone who’s successfully eliminated large credit card debts.  But the fact is, if you are consistent and committed to paying off your debt, it will happen. So then what? If you don’t have a plan for what to do with your money once your debt is paid off, it can be all too easy to start a cycle of over-spending that will leave you where you started. Here are several things you need to do once your credit card debt is paid off.

Bulk Up Your Emergency Fund

If you haven’t yet started to save for emergencies, you must do it now and deposit as much as you can into that account every month. If you already have an emergency fund, increase your monthly deposit. Why is this so important? It will help you avoid using credit cards to pay for a true financial emergency, such as major vehicle repairs, a new air conditioner, emergency medical bills, or everyday expenses in case of job loss. Remember, you just got out of debt. The last thing you want to do is get blindsided by an emergency and get right back into debt by having to use a credit card to pay for it.

Start Working On Your Retirement Options

The sooner you start saving for retirement the better, but it’s never too late. Look into the retirement savings options offered by your employer along with additional options such as a Roth IRA. If you’re self-employed, look into a SEP IRA, Simple IRA or Individual 401(k). No matter what how you choose to save for retirement, the important thing is to be consistent with your contributions and leave the money alone until you reach retirement age. You already know you have the discipline to pay off debt; apply that same discipline toward saving for your retirement.

Get Your Financial Life In Order

If you’ve managed to pay off all your credit card debt, there’s a good chance you’re already at least somewhat organized, but there’s always room for improvement. Set up as many bills as possible for auto-pay, so you never again have to risk paying late or missing a payment. Get all your financial documents in order and devise a filing system that works for you. Opt out of pre-screened credit card offers to minimize the temptation to overspend, not to mention cut down on annoying junk mail.

Review Your Insurance Coverage

You may have been getting by with bare minimum insurance coverage while working to pay off your debt, but now that you have more money every month, you may want to consider increasing your insurance coverage. For example, if you’ve been meaning to get life insurance but couldn’t afford it, now is the time. If you’re approaching middle age, look into long-term care insurance to add security to your senior years. Of course medical, dental and vehicle insurance coverage are all necessities, too.

Start Saving for a Major Purchase

If part of the motivation for getting out of debt was so you could start saving for a major purchase, such as a home or a new vehicle, it’s time to start making that dream a reality. Establish a savings plan solely dedicated to your goal and contribute to it regularly. You’ll be surprised by how quickly the balance grows.

9 Common Myths About How Your Credit Score is Calculated

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Under most scoring models, credit scores (also known as a FICO score) range from 300 to 850. The higher the number, the better a person’s credit – it implies that the person is a lower risk to a lender.

The score is calculated using a credit report that gathers data on your current and past debt and whether you pay the debts on time.

Besides determining whether or not you are approved for a loan, your credit score can determine the interest rate you will pay.

Following are many myths that people tend to believe about their scores.

Myth 1: The Credit Bureaus Decide Whether I Get a Loan

The three credit bureaus, Experian, Equifax, and Transunion generate credit reports – but they don’t evaluate your credit score or advise lenders whether to approve or deny a loan. The bureaus simply layout the facts about your credit history – like whether you pay your debts on time. Your actual credit “score” or “rating” is calculated by companies like FICO and VantageScore Solutions, however, these credit bureaus do evaluate your credit risk level based on your credit report.

Myth 2: There’s Only One Type of Credit Score

There are actually many different scores. For example, FICO has several models with varying score ranges that a lender can use. Thus, the FICO score attained by one lender may not be the same score received by another. If a lender declines your application or charges you a higher interest rate because of your score, determine what in your credit history may be negatively impacting your score and work towards resolving those issues. You can request a free copy of your credit report every 12 months from each of the three credit bureaus.

Myth 3: If I Close a Credit Card, its Age is No Longer Factored into My Credit Score

If you’ve got a card that has always been in good standing on your credit report, it might be best to leave it open. As long as the card remains on a credit report, the credit scoring system will continue to see it and still consider the card in the scoring metric—regardless of its age or standing.

Myth 4: A Credit Card Stops Aging the Day I Close it

Even after an account is closed, a credit card will continue to age and will continue to affect your credit score – whether your account was in good standing or not. However, a closed account will not remain on your credit report forever. The credit bureaus will delete them after 10 years if the account was in good standing, and after 7 years if the account had a damaging history.

Myth 5: I Need to Carry Debt to Build Credit

Not necessarily. It’s all about balance. Making minimum payments and maxing out your credit cards is detrimental to your credit score. It’s also a fast-track to needing credit card help. You’re better off having credit cards that are no more than 30% full to show that you can have credit without using it.

Myth 6: Medical Debt is Treated Differently on Credit Reports

Typically, medical bills aren’t reported to a bureau unless the bills are sent to a collection agency. But if the medical bills are reported, credit bureaus treat them the same as other debts. The more recent they are, the more they can affect your credit score.

Myth 7: A Credit Repair Company can only Remove Inaccuracies on My Credit Report

Credit Repair Companies can help provide advice and assistance in reporting inaccurate information on a person’s credit report. If information on a credit report is negative, but accurate, it’ll take at least 7 years to be removed, no matter how good the Credit Repair company is

Myth 8: My (Credit) Utilization Ratio Doesn’t Matter

Simply put, your credit utilization is the percentage of your available credit that you’ve actually borrowed. (For instance, if your credit card has a limit of $1,000 and you have $250 charged on it, your utilization ratio is $250 out of $1,000, or 25%.)

This ration is a very important piece of the credit scoring system and can seriously affect your credit score in a short period of time – for better or worse. The credit score tracking website CreditKarma.com recommends that consumers shouldn’t exceed utilizing 30% of their available credit. If all your cards are maxed out, you should look into how to pay off credit cards immediately.

Myth 9: I Should Avoid Getting Store Credit Cards Because They’ll Hurt My Score

As long as you use a store credit card responsibility, it can help raise your credit limit, improve your utilization rate and boost your overall credit score. In fact, it may be a great way to get a credit card for people who might not qualify for other types of cards.

How to Use Your Credit Card Wisely

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It’s very important to know the rules of the credit card game because if you don’t, you could quickly find yourself in financial trouble and in need of credit card help.

The following tips will help new and experienced credit card users avoid unwelcome credit card debt.

DON’T accept a credit card without reading the terms. Choosing a credit card involves more than liking the issuer’s catchy commercial. Instead, evaluate the credit card based on the fees, interest rates, and rewards—if it’s a rewards credit card. Moreover, compare credit card terms from different lenders to ensure that you’re getting the best deal.

DON’T use your credit card to make everyday purchases. Items like food, clothing and gas shouldn’t be purchased with a credit card.Using your credit card as a substitute for cash is a habit that can quickly lead to a situation requiring debt relief. For ordinary everyday purchases, leave your credit card in your wallet and use cash or a debit card instead.

DON’T stick to making minimum payments. Making only the minimum payment each month increases the payoff time and the amount of interest you’ll end up paying – which in some cases can be debilitating. For instance, if you have a credit card balance of $1,000 with an 18% interest rate, and you pay only the minimum monthly payment, it will take you 9.4 YEARS to pay off this debt – and you’ll have paid $923 in interest. You will be paying back nearly twice the amount that you borrowed and it’ll take almost a decade.

DON’T use your credit card to buy items you can’t afford. Living a borrowed lifestyle is the quickest way to get into debt or even go into bankruptcy. If you can’t afford a purchase today, chances are you won’t be able to afford it tomorrow, or even next month.

DON’T close a credit card account without knowing how your credit will be affected. There are times when closing a credit card can hurt your credit score. Avoid closing cards that still have a balance or those that make up a significant amount of your credit history.

DO use your credit card responsibly. Recognize which items you actually need (a necessity) or simply want (an impulse purchase). Avoid the “wants” as much as possible.

DO let your creditor know in advance if you can’t make your monthly payment on time. Foregoing your credit card payment is never a good thing, but many creditors will offer you some credit card help if you notify them before you miss your payment. Call your creditor, explain the situation, and ask that any late fees be waived. Missed payments may still adversely affect your credit score.

DO stay within 30% of your credit limit. A sizeable percentage of your credit score factors in the amount of debt you have versus how much you could borrow on your cards. Keeping your balances low helps maintain a good credit score.

DO negotiate a lower interest rate – especially if your current rate is higher than offers received from other lenders. The higher the rate, the more you’ll pay for carrying a balance on your credit card. Periodically evaluate the interest rate on your credit card to be sure you’re getting the best deal possible.

DO review your statement each month. Don’t take for granted that everything on your credit card statement is accurate. Be sure that your last payment was applied correctly, you were charged the right amount for all of your purchases, and there were no unauthorized transactions. Dispute any errors with your credit card issuer within 60 days and report unauthorized charges immediately.

For more credit card help, or to talk to someone about how to pay off credit cards, contact one of our consultants at US Debt Relief. Call us today at 1-888-910-8411.

Do You Know What Lenders Look for?

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You probably think your credit score is the main thing that lenders and creditors use to decide whether to give you a loan. But they use other tools to measure your creditworthiness and whether you’ll have a tough time repaying a new debt.

Keeping your credit in top shape involves more than making your payments each month. Even if you make minimum required payments, your credit score may not be optimal.

Definition of ‘Credit’

Credit is a contractual agreement in which a borrower receives something of value now (usually money) and agrees to repay the lender at some date in the future, generally with interest.1

What do Lenders Look at to Make a Loan?

Lenders look at things like your debt-to-income ratio (DTI), credit utilization, and total amount of debt on your credit profile.

Debt-to-Income Ratio

Lenders use the DTI ratio to see if you have enough income available to pay your debts. You know you are suffering from a high debt-to-income ratio if, once you pay your fixed expenses (like housing, other loans, and utilities), there is very little left over at the end of each month. The higher the DTI, the less likely you will be able to repay the requested loan and so the less likely you will be approved.

Credit Utilization

How much of your available credit do you actually use? Do you borrow the maximum on your credit cards each month? A high credit utilization rate will negatively impact your credit score.

Total Amount of Debt

If the total volume of debt on your credit profile is too high, you can be denied credit even if you’ve got a good history of making debt payments. You might be making the minimum payments on all that debt, but paying off your debt in full could take decades. In short, you could use some help with your credit card debt.

A Good Credit Profile

What does a good credit profile look like? A profile capable of taking on a loan has a low debt-to-income ratio, has credit utilization rates under 30%, and carries very little debt. A good credit profile also shows some savings, whether in the form of savings accounts, retirement plans, stocks and bonds, or some other liquid asset. And of course, that profile will have an excellent history of making payments to lenders and creditors on time every month.

The trick to understanding your credit worthiness is to remember that all of these components are interdependent. High credit utilization rates hurt your credit score. A high debt-to-income ratio prevents you from having the money left over each month to pay down new debt . High total debt amounts drive up the minimum payments you need to make, and most of those payment will only cover interest without significantly lowering the principal you owe.

This credit trap could keep you in debt (even if you stopped using credit cards today) for the next 14 to 27 years. For the vast majority of that time you will not have the ability to get new credit because you will not have the capacity to pay it back. So even making on-time payments every month won’t help your credit worthiness or your financial future.

If you need help with your credit card debt, and want to learn how to save money, get in touch with one of our consultants at 1-888-910-8411

What You Should Know About Your Credit Report

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You should review your credit reports every year and, if necessary, take the time to clean them up. Mistakes on your report(s) can negatively affect your credit score, which is used by lenders to determine if they’ll lend you money and, if so, the interest rate you’ll pay. Some employers review credit reports, too, so faulty info could even affect your chances of landing that new job.

What does it mean to clean up your credit report?

Cleaning up your credit report means identifying, removing, or fixing inaccurate and outdated information – whether it is an incorrect notation about how an account was closed, dated information about a bankruptcy that should no longer appear on your report, or accounts that simply aren’t yours.

Be careful of credit repair companies that claim they can “repair your credit” or miraculously “boost your credit score”. Cleaning up your credit report does not mean hiring a credit repair company to remove delinquent accounts or eliminate other unfavorable entries that are legitimate. When it comes to rightfully removing inaccurate or old information from your reports, you can do that yourself with a little patience – and without the credit repair companies.

First, get copies of your credit reports

You probably only need to order credit reports from the three main credit reporting agencies (known as “CRAs”) – Experian, Equifax, and TransUnion. By law, you are entitled to one free copy from each CRA every 12 months. And because each report may contain different information, you should order a report from all three.

There are also specialty CRAs such as the Lexis Nexis Personal Reports or Medical Information Bureau. Some of these track information specifically about tenants for use by landlords. Others may contain more personal information and are used by employers and insurers. You’re entitled to one free annual report from these agencies as well – although determining which ones have a file on you could be a bit of a challenge.

Review your reports

In general, any adverse information that is more than seven years old can be legally removed.

Carefully review each report for any entries that are inaccurate or incomplete. Here are some examples of what to look for:

  • Debts and Loans: Make sure any listed amount of each debt and loan is correct. Make sure there are no duplicates. And verify your payment history is accurate
  • Defaults: You may see defaults if you made a payment more than 60 days late. If you have paid an overdue payment in full, make sure your report reflects that.

Check that your basic information is correct, such as:

  • Your name, date of birth, and address.

Contact the credit reporting agencies

Make a detailed list of anything you believe is inaccurate, outdated, or even missing. Then, gather supporting documentation that will backup your position. For example, if you closed an account that’s still reported as open, you’ll need to prove that it’s closed. Send a detailed letter directly to the appropriate CRA requesting the corrections be made to your credit report(s) and provide the supporting information.

Remember, each CRA may report different information, so you’ll need to examine reports from each agency.

Links to each Credit Reporting Agency:

www.experian.com

www.equifax.com

www.transunion.com

Spring is the perfect time for cleaning, so reviewing your credit reports every spring will keep your credit score in the best shape it can be.

Who Should Contribute to a 401(K)?

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Wondering “Is a 401(k) right for me”? The simple answer is that it’s a great retirement option for almost everyone, including those in need of debt relief or credit repair.

For some of us, retirement seems a very long way off. But with people living longer and Social Security’s future in question, you may need to save more than you realize. And the earlier you start investing, the more time your investments have to grow.

A 401(k) plan is one of the most popular ways to save for retirement. You should consider contributing to one even if you’re looking at debt relief options or need to pay off credit cards.

Sponsored by your employer, a 401(k) lets you invest a percentage of your paycheck (you decide how much, currently up to $18,500/year if you’re under 50). The money you invest isn’t subject to income tax right away, so every dollar you contribute lowers your tax bill that year. Think of your contributions as saving and investing some of your income that would otherwise be earmarked for taxes.

Any earnings you make on the money held in a 401(k) grows tax-deferred. This means those earnings are not taxed until you withdraw them. Meanwhile, tax-deferred growth gives you the opportunity to build substantial retirement funds over the long term (depending upon how your investments perform).

When you actually withdraw money in retirement, that is when you will pay the income tax. The hope is that you’ll be in a lower tax bracket then because you won’t be earning as much.

Should you need the money before retirement age, you can withdraw it but will need to pay the income taxes that year plus a penalty.

Your employer will offer an array of stocks, bonds, and other investment options in the 401(k) plan. Then you choose how to invest, based on your financial goals and future plans. As your goals and plans change, you can change your investment choices.

If your employer offers a 401(k) contribution match, you should (at the minimum) contribute enough to take advantage of the full match. It’s “free money” you are being offered as part of your overall benefits package. As an example, your company might match 50 cents per every dollar you contribute up to 6% of your total salary. So if you invest 6% of your salary, your employer would match 3%, meaning you’d end up with 9% of your salary in your account but only need to contribute 6%. The company may have a rule that, if you don’t stay with them for a determined number of years, you will forfeit some of the matching dollars.

Many 401(k) plans offer the ability to borrow against your vested balance. The interest you’re paying will go to your retirement account, instead of to a bank or other lender.

Remember, you’re never too young to get started saving for retirement and a 401(k) is one great vehicle to do it.

For more information about 401(k) plans, you can visit https://www.irs.gov/retirement-plans/401k-plans.

5 Factors That Impact Your FICO Credit Score

Managing the Cost of Living in Retirement

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Given our current economic conditions, inflation and cost of living increases don’t appear to be much of a threat. In fact, today we’re witnessing deflation in the price of oil and other commodities. However, history tells us that it’s unlikely inflation is dead, and when planning for retirement, ignoring the effects of inflation or other cost-ofliving expenses can be disastrous.

While Social Security and most government pensions are generally tied to some type of inflation-related cost-ofliving adjustment, many other investments are not. So proactively managing your various retirement income sources makes good sense.

Consider Investment Alternatives

Early on during your retirement planning, a significant portion of your portfolio was probably invested in stocks, which most likely earned returns in excess of inflation over time. While it may be tempting to move away from equities following market losses, doing so could impact your ability to stay ahead of inflation. Nonetheless, it’s wise to diversify your investments among various asset classes based upon your risk tolerance, income needs, and age.

Make Sound Pension Decisions

If you’re covered by a pension plan, you might be entitled to choose whether to receive monthly payments during your lifetime, or a lump-sum-payment. Either option has merit based upon your personal financial needs.

Most private pension plans don’t offer cost of living increases. So, if you choose to receive monthly payouts, your monthly payments will lose value in real terms due to inflation. Conversely, most public pensions do have a costof-living feature, although there is no guarantee that future increases will keep pace with inflation.

If available, taking a lump-sum distribution and rolling it over into an IRA can be a good strategy – although any investment carries financial risks. This approach also assumes that you’re comfortable managing and investing this money, or that you have a financial advisor that can help you.

Collecting Social Security

You’re eligible to begin collecting Social Security benefits at age 62 – although taking benefits at that age will reduce your monthly payments. By waiting until your full retirement age, your monthly benefit will be 33% higher. Wait until age 70, and your monthly payment will grow an additional 35%. The increases are also prorated from year to year so if you began collecting benefits at age 64, your benefit would be higher than at age 62. Additionally, waiting longer to collect will also increase your cost of living.

Manage Fixed Expenses

Try to enter retirement with as good a debt to income ratio as possible. If you aren’t using a significant portion of your income to pay a mortgage, car payment or credit card debts, you’ll have more flexibility when dealing with cost-of-living increases and inflation. If you’re someone who could use some debt relief, it’s a smart idea to consider debt relief programs and figure out how to get out of debt before you retire.

Health-Care Costs

Although Medicare is available when you turn age 65, it doesn’t cover all healthcare related costs, and the cost of healthcare during retirement is often cited as an expenditure that becomes increasingly difficult to manage over time. In fact, in recent years’ healthcare costs have increased at a rate greater than the rate of inflation. Consider researching supplemental policies and prescription coverage to help with non-covered expenditures.

Minimize Withdrawals

To help counter inflation, you would conceivably need to withdraw larger and larger amounts from your retirement account just to maintain the same purchasing power. Overall, try to keep withdrawals to a minimum. Conventional wisdom in the financial planning world says that 4% can generally be withdrawn each year—but that is only a rule of thumb. In truth, you will need to manage and potentially adjust your annual withdrawals based upon factors such as inflation and investment returns.

The Bottom Line

As the cost-of-living inches up during retirement – and chances are it will – you may need to look for ways to reduce your living expenses. In the end, properly managing your investments and spending will go a long way towards ensuring a financially secure retirement.And if you think you could benefit from credit card help or a debt relief program, including debt settlement, you can contact one of our Consultants at 1-888-910-8411 . We can provide you with a solution that is custom designed for you.

Fixed Vs. Variable Rate Loans

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Calculating your loan payments & Secured vs Unsecured Loans

When it comes to interest rates, they are either fixed or variable. Both have their advantages and disadvantages. Typically, installment loans use a fixed interest rate because the repayment amount and schedule are fixed. However, revolving loans more often than not are accompanied by a variable interest rate.

Let’s review an example of a fixed rate loan:

  • Installment loan amount: $25,000
  • Fixed interest rate: 6%
  • Length of loan: 5 years/60 months
  • Monthly payment: $483.32

The best part of the above example is that it is clearly stated. You can determine whether the monthly payment fits your budget. If the payment exceeds your budget, you can possibly adjust the equation by lowering the amount you borrow or lengthening the time of repayment. A loan payoff calculator is a great tool in determining your monthly payment.

If you were to use the same example above but changed the interest rate on a monthly basis, either increasing or decreasing it (a variable rate), you could end up paying less – or unfortunately, paying more. Depending on your comfort zone, one might be more appealing than the other. Those borrowers who are “risk averse” want to know that their payments are “fixed” and that regardless of what happens in the speculative interest rate market, the monthly payment won’t change for the life of their loan.

Examining the various options with your lender may help you to better visualize the loan program that is best for you. After all, being a responsible borrower will only benefit you for many years to come.

Lenders Like Secure Loans

Lending has an element of risk. So, whenever loans can be made and collateralized with an asset, lenders feel more secure. However, many loans are unsecured. For example, when you charge something on a credit card, there is an absence of collateral that a lender can put a lien on should you default. The better your debt to income ratio, the more favorable interest rate you’re likely to get.

Secured Versus Unsecured Loans

Whenever banks or lenders approve a loan, lending institutions like to have as much security as possible. They want to know that if a loan is not repaid they have a “Plan B” to fall back on. Collateral security is achieved by attaching a loan obligation to an asset so that in the event a loan defaults, the lending institution can seek repayment by liquidating the collateralized asset. Both installment loans and revolving loans can be secured should the lender make this a requirement.

An automobile loan and a home mortgage are perfect examples of secured loans. Failure to repay the auto loan means that Plan B takes effect in the form of a repossession.

Default on your mortgage payment, and a foreclosure on your home may ensue. Responsible borrowers use every means at their disposal to make certain that a default never occurs.

And the fact that lenders frequently charge higher interest rates on unsecured versus secure loans is no accident because their measure of risk is increased when there is no possibility of relying on Plan B.

For more information when it comes to personal loans, call 1-888-910-8411 today for a free, no obligation assessment with one of our experienced Consultants.