Getting Loans

Sometimes, it may seem as though lenders are trying to give away money by making credit so easily available. But this is a dangerous illusion. When it comes to consumer debt (credit cards, auto loans, and the like), lenders aren't giving away anything except the opportunity for you to get in over your head, rack up high interest charges, and delay your progress toward your financial and personal goals.

Credit is most dangerous when you make consumption purchases that you couldn't afford in the first place.

Nevertheless, there are times when you need to borrow: to buy a house, to pay for college, to start your own business, to pay unexpected medical expenses, and sometimes to give in to the temptation to purchase something you've always wanted. The way you get a loan is by establishing creditworthiness. You are deemed worthy of credit if you have sufficient assets to repay the loan and if you have a good history of loan-repayment, based on your credit report. If your record of repayment is poor, you'll either be denied the loan, have to pay higher-than-normal interest charges (interest rates vary depending on the nature of the loan, the loan agency, and the health of the nation's economy), or, depending on the purpose of the loan, you may qualify for government assistance.

All loans are either secured or unsecured.

The most common items purchased by a secured loan are houses, cars, household furnishings, and jewelry. Unsecured loans include loans to pay credit card debt, college expenses, vacation costs, and medical bills. Because unsecured loans are riskier for lenders, most of these loans have higher interest rates than secured loans do, usually representing the biggest drain on your finances.

Before you ask for a loan, be sure that your loan payments won't strain your budget. Try to make extra payments on the loan or pay it off early if there are no penalties to do so. If practical, consider a home equity loan as you can usually get a lower interest rate and the interest is tax deductible. Just be certain you can make the payments, as your home is at risk if you can't.



You can get loans from your bank, savings and loan, credit union, and a host of vendors and other agencies with money to lend.