If you need to borrow money for the first time, you are going to need to do some research and really get to grips with the different ways to borrow. You also need to know about interest rates, credit scores and making applications, as well as how to get the very best deals from banks, credit card companies and other lenders. To get you started on your way to becoming a smart consumer and an ever smarter borrower, here is the vital information you need to know.  Read below for the Smart Consumer’s Guide to Borrowing.

Ways to borrow money

There are several ways to borrow money. The main methods include:

  • Personal loans – either secured (meaning that the loan is secured against property or assets) or unsecured loans for amounts between £1,000 and £25,000
  • Credit cards – an unsecured, flexible form of borrowing for small sums
  • Overdrafts on bank or building society accounts – a short-term form of borrowing which can either be authorized by the bank or unauthorized, meaning that you will have to pay a fee for every day you are ‘in the red’
  • Mortgages – a secured form of borrowing designed for consumers wanting to purchase property
  • Store cards – an unsecured option for making purchases in shops and online stores now and paying later.

Interest rates

You should choose a form of borrowing based firstly on how much you want to borrow and secondly, on what you want to use the money for. The next thing to consider is interest rates. Interest rates vary from product to product, but tend to be highest on things like credit cards, overdrafts and store cards. You should always look to get the lowest interest rate available, although if you plan to pay back your balance in full (i.e. on your monthly credit card bill), you won’t need to worry too much about interest rates. Visit kreditfinanzcheck.de for guides on finding loans with the lowest interest rates.

Paying back what you owe

Along with interest rates, another thing to consider when borrowing money is how and when you will pay it back. Spreading payments out over a long period might be convenient, but it is also likely to incur more interest, making the cost of borrowing much higher overall. There is also the option to make minimum payments each month, particularly on credit cards, but this too can incur interest. The best option is to only borrow amounts you can afford to pay back and to pay off your balance in full every month, making sure to never miss a payment.

Credit checks

Lenders always carry out credit checks when a person applies to borrow money. This means that when you apply credit card companies will look into your credit history and ascertain your credit rating. Any late or missed payments in the past could lead to you being rejected, offered only high interest rates or smaller credit limits.

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