Understanding Personal Credit Loans

The appropriate use of credit is an important skill for consumers to master in their financial lives. Using personal credit loans is about more than getting the cash you need, it’s also about repaying the money in a responsible manner. To understand personal loans fully, you must know the affect each has on you in addition to the loan’s terms and conditions.

Personal Loans and Credit

The relationship between personal loans and your credit score does not end after you receive the loan. Lenders have the right to report their experiences with you to the credit bureaus and they take regular advantage of this. If you follow the terms of your lending agreements and repay your personal credit loans accordingly, you won’t have any problems. On the other hand, mishandling your finances and defaulting on your credit obligations carries consequences.

To maintain good credit, avoid three common traps.

Relying on the Grace Period

Some personal credit loans provide leeway for payments in the form of grace periods. This helps you to avoid the late fee if your check takes an extra day in the mail or is in transit during a postal holiday. Loan grace periods are good things, unless you take advantage of them.

For example, if your mortgage payment is due on the 1st and late on the 16th, you have 15 extra days to get the payment to the lender. This helps you protect your good credit rating in the event your check is slow to clear at the bank. This grace period hurts you when you view the 16th of each month as your due date because you no longer have any leeway. If anything happens to delay your payment at the middle of the month, you risk a negative credit report and a late fee.

Missing Payments

It happens to everyone at some point. You receive the bill and you have enough money to pay it, but you still have plenty of time before the due date, so you set it aside. Weeks pass and you get a notice of non-payment because you forgot to go back and pay the bill. Make a habit of paying your bills when they first arrive or scheduling automatic payments. One missed payment on your credit report isn’t the end of the world, but multiple slow pays will lower your score.

Minimum Payments

If you have personal credit loans that offer minimum payment options, they are just that: the minimum you should pay. Not only will you pay more over the life of the loan by making minimum payments, your credit suffers as a result. Resolve to pay more than the minimum amount due on every account each month.

As long as you avoid the common traps, you can use personal credit loans as tools to improve your credit rating while financing the things you need.

Source: http://www.superpages.com/supertips/personal-credit-loans.html