There is no shortage of options for consumers today for their borrowing needs. Whether it’s renovating a home, buying a boat, consolidating debt, paying off a wedding, or just looking to establish and build your credit history, there are loan products designed for a variety of uses. and with conditions that can adapt to many budgets.
While figuring out which loans are best suited for certain uses and budgets can seem overwhelming, there are a few basic steps you can take to sort your options and manage your finances wisely.
Talk to your bankerA thorough review of your accounts, budget, income, and financial goals is a great first step.
Your banker can help you with this review and advise you on the best options. For example, if you are just starting to build up credit and want to build a good history for later large purchases, opening a rewards credit card can be a great step.
Make a plan to only use the credit card for certain purchases that you would normally use cash or your debit card for, then set that money aside to pay the credit card bill in full each month . This way, you build a good credit history and don’t run into revolving debt.
It’s important to avoid building up credit card debt or using a high interest “payday” loan, as both can create a cycle that can hurt your finances and your credit.
Have a planIf your credit is better and you’re looking for a low-interest option for a large purchase or debt consolidation, a personal loan may be a good option.
Personal loans are unsecured, which means you don’t need collateral to get the money you need, and are set for a fixed amount that you pay back over a period of time. These terms can help you determine how much you can afford to repay over the life of the loan.
A personal loan can be a particularly attractive option for homeowners who want to renovate but don’t have enough equity for a home equity loan. Personal loans are also good for small projects because you can borrow as little as $ 2,000.
Other options for those with home equity or a savings nest egg could be a Home Equity Loan or Line of Credit (HELOC), or taking out a smaller loan for a project while still using money.
The key is to plan a strategy that best uses your financial situation and planned future spending as a guide.
Protect your future financesPart of your plan should also include emergency preparedness. When determining how much you need (and should) borrow, consider your emergency savings status as well.
Make sure the amount you borrow and the terms are within your budget, leaving you in a precarious position if a medical or other emergency arises that you cannot immediately afford.
It’s important to avoid accumulating credit card debt or using a high interest “payday” loan, as both can create a cycle that can hurt your finances and your credit.
Protect your creditEvery year, Americans are entitled to a free credit report from each of the three major credit bureaus, Equifax, Experian, and TransUnion. Make sure you receive these reports and review them carefully. If you find any deviations, report them immediately.
You can also set up banking and fraud alerts through your bank’s mobile or online site, as well as for any credit card accounts you have, to monitor and protect your credit.
Taking these steps can help ensure that no matter what stage of borrowing you are in now, you can continue to maintain a strong credit build and your financial future.