I’m back with another collaborative post for y’all! I’ll be touching on a topic that isn’t often discussed on too many blogs, finances, and types of credit.
The majority of people are bound to take out some sort of credit agreement in their lives. A credit agreement is a legally binding contract that you have to sign if you want to take out a loan from a professional lender. There are various reasons for people taking them out. Sometimes, people will be in need of money that they don’t have. Perhaps they have lost their job and need some cash to tide them over until they are employed again. Maybe they don’t have a vehicle of their own but really need a car to be able to land a job position that they have been offered. They might already have a vehicle, but it has broken down and requires repairs. An essential appliance such as a refrigerator, oven, or washing machine could have broken down unexpectedly. These are all common reasons for people taking out a credit agreement. But it’s also important to bear in mind that you don’t necessarily have to need immediate access to cash in order to take a credit agreement out. Some people will take out loans and sign agreements in order to improve their credit rating. By taking out small loans and handling them responsibly (paying them back as and when agreed) shows lenders that they are reliable and can be trusted to borrow money. This makes life easier for them when they try to take out larger loans or mortgage agreements down the line. Now, if you’re considering taking out a credit agreement, it’s extremely important that you are aware of your options. There are plenty of lenders out there on the market who will be vying for you to use their services. So, you need to make sure that you sign up to the one who offers you the best deal. Here’s everything you need to know about getting the most from any given credit agreement!
Understanding Credit Cards
The first thing that you need to do when taking out a credit agreement is to decide what kind of lending you want to engage with. There are various different ways to borrow money. So, let’s start with one of the most common and most accessible forms of borrowing – credit cards. The majority of us will end up with at least one credit card at some point in our lives. Credit cards are essentially open-ended loans. Your credit card provider will offer you a credit limit of a given sum of money. That is then yours to borrow as and when you please. When you use your credit card to make a purchase, the sum will be deducted from your balance and will become an outstanding figure. It is then up to you to pay this figure back onto your card. Again, you can do this – to an extent – as and when you please. Each month you will be given a minimum payment figure, and as long as you pay this back by the given date, you will be fine. The rest of the balance can remain the same. You can also spend the money that you have paid back time and time again, as long as you just keep up with the monthly minimum repayments. However, unless you have an interest free credit card, it’s extremely important to remember that your credit card provider isn’t providing you with a free service when it comes to borrowing their money. The overwhelming majority of credit cards come with an interest rate attached. This interest rate is a sum of money that is added to your balance and which you have to pay back on top of the money that you have borrowed. So, you want to only take out or use a credit card that has a low interest rate. If this all sounds a bit complex to you, you can click here for everything about what you need to know.
Understanding Personal Loans
A loan is another common form of credit agreement. There are all sorts of loans out there that serve a variety of different purposes, but for now, let’s focus on the personal loan. When you take out a loan, a lender will agree to deposit a given sum of money into your bank account. You will then pay them back this sum, plus interest, at agreed intervals over an agreed period of time. Generally speaking, you will find that you pay back a given figure on a monthly basis for one year, two years, three years, five years, or even ten or more years if you have taken out a particularly large sum of money. Personal loans are favoured by many people, as they can be used on pretty much anything that you want (as long as it is legal) and as they are a form of unsecured debt. This means that you don’t have to use your house, vehicle, or other assets as a form of collateral, meaning that nothing can be repossessed if you don’t pay the figure back as agreed. It is, however, extremely important that you do pay your loan back as agreed, as it’s not free money. If you fail to meet the terms of your credit agreement with the lender, you could find yourself being taken to court and sued by the lender.
These are just two different forms of credit agreements that you may find yourself taking out at some point in your life. So it’s a good idea to familiarize yourself with them sooner rather than later. This gives you more time to get to grips with the concept, rather than trying to process quite so much information when you need access to cash quickly or to improve your credit rating quickly. Hopefully the above information will help you to achieve this!
This post was a collaborative effort – please check out my disclosure policy page for more details.