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Protect Yourself with Knowledge about Loans Loans are necessary and have been for thousands of years. Moneylenders, noted in ancient writings including stories from the Bible, have unfavorable references. There are times when it is mandatory to seek financial assistance and those are usually the times to seek a loan. Generally, people think of two items, a home and a car, as the main reasons for loans. Many other events lead to borrowing money and bring to light the factors that affect each situation. Contemplating the usual methods of acquiring assistance is enough to give cause for thought, so questionable loan methods are ignored in this article. Consumers often fail to recognize credit cards as a loan, thinking more of the cards as being convenient ways to obtain different items that are desired and easier to put on a card. When a signature enables people to pay for dinner or walk out of the store with purchases, it does not seem as though a loan is taking place. It is the same when using a credit card to secure a rental car or put gasoline in at the station. Yet, that signature or agreement to pay constitutes a loan. Credit cards have high interest rates, in addition to annual fees and other charges. Some cards allow cash advances for a set fee, so read and understand fees assessed on the credit cards and the best way to avoid extra charges. Find out which types of charges have the highest interest rate and pay extra towards that charge whenever possible. The minimum monthly payment usually covers the interest, while the principal remains untouched. Those with an excellent credit rating find themselves in the ideal position to borrow money at extremely low interest rates. Another benefit of good credit is receiving better terms. Sometimes interest-free offers give an opportunity to purchase something needed, such as a computer, refrigerator or television, interest-free as long as the principal is paid within a certain amount of time. That is different from interest-only payments, low monthly payments towards interest with no payment to the principal. Pass that type of loan by unless it is certain the principal is affordable within the budget. Unsecured loans such as credit cards, student loans, and personal loans require no collateral. Freezing accounts if the payment is late happens if the unsecured loan is through a bank or credit union. The balance, plus interest and penalties, goes to the legal section or collection agencies for further action. Interest tends to be higher because of the risk of extending cash and credit without security. Secured loans, including mortgages, involve the promise of an asset, such as a car or house. Default allows the lending agency to take the collateral. Some customers request a larger secured loan amount to pay off other high interest debts and allow more money each month for the new payment. It is tempting to pay the minimum payment, but wise to apply extra money towards the principal whenever possible. Secured loans cover recreational items, such as boats, RVs and snowmobiles, vehicles and mortgages. Home equity loans are another type of secured loan. Some secured lines of credit often offer interest-only payments. Many businesses cover daily or weekly incidental costs with a line of credit. Conventional loans are both secured and unsecured and some include a prepayment penalty. They include car, home equity and personal loans and have contractual repayment terms, including the payment date, interest amount and term of the loan. Student loans and payday loans are two recent types of common loans that offer a quick fix to a financial problem, although the temporary relief creates hardships regarding repayment. Tempting as they might be, try to avoid them unless the money is an absolute necessity. Curtis Glenn is an internet marketer and member of the Empower Network working online while still having a life. http://www.empowernetwork.com/curtislg
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