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Important things and Tips you must consider before applying for a credit.

by admin on March 19, 2013

Many times we have the need of requesting money and do not stop to analyze the legal consequences of the banking contracts we signed.

Before applying for a credit of any kind, you may want to consider and evaluate the following information:
1) Purpose of the credit 2) Interest rate 3) Monthly payments 3) Collateral required 4) Type of the Credit 5) Penalty waiver on prepayments 6)The Lending Bank 7) Credit Score 8) Your ability to pay.

The famous fine print or large contracts that make us feel helpless, those who we avoid reading or simply, not being lawyers, we do not understand.

Today I invite you to do your homework. Analyze the important points that you should consider in the credits and before signing, make sure you banker answers you about the conditions he is offering you.

Always remember: Banks are in the business of grow their own business by lending money to others, it’s up to you to understand the conditions they are asking from you and then taking the conditions that really help you.

I do not understand why the banks or pawnshops are not limited or controlled and are allowed to charge fees or unfair conditions for users in need, that’s why I then enlisted the most important points of credit, which if you can handle, represent a tool to your advantage when you commit to an institution.

1) The purpose of credit. There are loans that are used for housing and are usually much cheaper than what credit cards offer.

There are also business loans that are usually cheaper than personal loans. Even business loans can vary in their rates for example from 24% to 11%.

The credits can be: mortgage, to cover other debts, for consumption, for inputs, etc.. For all this, it is advisable to inquire banks on which are rate options depending on the credit that they will grant you, never forget to ask if there are more favorable conditions and how you can obtain them.

Credit cards are the most expensive loans when you refinance with them and do not pay the whole amount. We must be very careful with them, for example when a person for reasons of emergency or job loss chooses to use credit cards and cannot pay monthly. This type of credit is called consumer credit and the banks charge it so expensively because it poses a great risk for them.

In Mexico I have come across credit cards that have rates up to 67%. A person who loses his job and uses the card to live can almost file for bankruptcy as covering only the minimum, the stakes are so high that they will never pay off the debt.

2) Interest rate. Interest rates are the lower the better. It happens often that interest rates will be higher if the person does not have very good credit, lacks it or begins to exceed his or her ability to pay. Banks usually consider a warning signal when a person “owes much” since they are at risk of lending money and not recovering it, so that the higher the risk, the higher the rate (collect).

On the other hand, when a person has a good credit record he or she can usually afford to apply for credit in different institutions and to choose the one that gives the best rate. If this is your case, really take advantage of it in your favor.

Always consider that the interest rate is added with tax so it is important that a person requesting a loan ask what will be the final rate corresponding

3) Number of monthly payments. The more monthly payments a credit has, the less money you will pay monthly, but you need more time to cover your debt and it will be much more expensive for you to pay interest. Any person seeking a long-term credit has to be very cautious, frankly, the sooner you can pay a credit is better because you liberate yourself from the economical commitment and the psychological impact favors you. In this case, look for paying the lowest number of months trying at the same time that you can easily cover the monthly amount.

4) Collateral or guarantee required. There are loans that require an asset or a deposit to cover the money you pay, but there are also claims not ask for any collateral. In this regard I can tell you that if the credit is using a collateral such as a house or a building, it always has to be an asset free of charge, i.e.; an asset that is not committed to the payment of any other debt.

Banks usually want to make sure they will get their money, a collateral is a form of insurance for them. If you as a company or as a person do not have the ability to pay, you’re likely to put at risk your assets.

Whenever you go to ask for a loan with a collateral it is important that you measure your income well so you can get the money without jeopardizing your assets in case of a possible breach.

Always avoid involving third parties or guarantees. The use of a collateral by the bank gives them the right to charge the collateral your payment in case of you not paying. If you can, avoid it.

5) Prepayment penalty. Whenever you apply for a credit ask for the option of NOT having a prepayment penalty. The reason, it can occur that you receive more income or an inheritance or make a good deal, when it happens, it’s well worth considering prepaying without it representing you some kind of penalty. HIGHLY RECOMMENDED.

6) The lending bank. . Banks compete with each other to attract more customers with money and in turn compete for lending money to produce. Within this competitiveness they offer better rates and terms for deadbeat customers. When you have a choice of several banks that have set their interest in you, find the best conditions. They will fight for you.

7) Credit Bureau. The bureau reflects each and every one of the credits you have and have had for the past 5-10 years. It also reflects your timely payments as well as your behavior, if you pay all or only the minimums, as well as the monthly amount you must pay among all institutions. The sum of all these factors is weighted and give you a value. Additionally, it is recorded if at any time you filed a complaint, you refused to pay or you were sent to specialized collections.

As incredible and exhausting as it may seem, lending institutions have much power to affect your record. If for some reason you forgot to pay the cable, telephone or any other service, believe me, it will be reflected in your history. For this I recommend that you keep very well your statements and pay off any debt or service to have an impeccable credit history

8) Your ability to pay. One of the points that most banks pay attention to is your ability to pay. The ability to pay is the amount you can shell out easily. This varies from bank to bank and from country to country, banks usually seek that your salary or income is not compromised by 30 or 40%. That is, suppose you earn $ 100 monthly, banks typically seek your to spare about $ 40 after expenses in order to encourage you to have enough money to pay your credit.

9) Timely payments. Remember to always pay as much as possible especially the cards, you can pay more than the minimum or than requested, try to pay as much as late as on the limit or earlier if you can, with this you will avoid surcharges, problems in your credit history and phone calls. Phew, with that’s enough!

Remember to analize these points and if you need more help please leave your comments.

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