Monday, July 2

Cheapest Personal Loan

Dream On!Of course, the best personal loans are the ones that have already been paid back. However, if you have the discipline required to manage your debt appropriately and you simply must use your credit, then do it as cheaply as possible.

0) If you are willing to open Pandora's Box you may consider getting a loan from your family. For example, parents may be willing to offer you an interest free loan. This is as cheap a personal loan as you will ever find... as long as you pay it back under the terms originally agreed to.

1) It might be appropriate to get a line of credit based on your home equity. A bank line of credit is basically always available to you and usually carries a pretty low interest rate.

2) If you have a good credit rating and a steady income you may simply be able to open up an unsecured line of credit with your bank. This will also generally be available all the time and carry a very reasonable interest rate. For most people I believe this will be the cheapest personal loan available.

3) A more expensive option is generally to get credit cards issued with your bank. The cheapest credit cards, if you are forced to finance something over time, are those with low interest rates. Often these cards will have an annual fee. Normal higher interest rate cards are okay if you pay them off in time and they generally won't have a fee.

4) Perhaps the most expensive option is to get a heavily advertised card that jumps to a huge rate of interest after the promotion period has ended. Of a similar nature are most store specific credit cards. Their may be a few good ones I'm unaware of but basically they all amount to a rip off. Throw them out.

5) I have to say that I don't consider the so-called check cashing services to be akin to a personal loan. The short term nature of these services and the fees imposed make it a ridiculous way to throw away your money.

On a related note, don't be afraid to shop around a bit. You can certainly open an account at a competing bank in order to get better credit and financing terms.

Anyway, there are certainly times it is appropriate to finance something, whether personally or for business purposes, and it is not just because you really want something expensive. I know that a lot of people will already know this, but there are people out there falling for these more expensive options all the time.

I'll be happy if I can help even one person be guided towards healthier credit options... even if it is only because I am disparaging something they are currently doing.

Frugal Guy said...
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Anonymous said...

Thanks for the great ideas. It's also best to shop around for the best rates. Annette