Personal Credit Management Tips

Money management is a skill best learned over time and with the benefit of those little mistakes along the way. While some have an inherent knowledge of personal credit and financial matters, the majority of people stumble from time to time. No matter which end of the spectrum you fall, you can whip your credit and finances into shape with a few simple tips.

Understand your credit report

Figuring you have plenty of time to learn about your credit isn’t the most productive approach. The saying “what you don’t know can’t hurt you” doesn’t apply to your credit score. Pull a free copy of your personal credit report from the credit reporting agencies at least once per year and make a habit of disputing incorrect information. Paying attention to your credit before you need it ensures fewer surprises when you apply for a loan.

Respect your credit usage

If you aren’t in a position to pay off your personal credit card bills each month, that’s ok as long as you plan for it. By now, you’ve already heard that the average credit card takes 30 or 40 years to pay off when you only make the minimum payments. Cash flow doesn’t always come in even batches, so making only the minimum payment on your cards may be necessity. When you know you won’t have the funds to pay the full amount, forgo making frivolous personal credit purchases. Do you really want to pay interest on fancy restaurant dinners for the next several years?

Plan for the future

Building up your savings account is the best way to avoid overextending your use of personal credit options. Create a savings plan that covers the full range of your goals. If you know you’re spending a week in Hawaii next winter, begin saving now to avoid racking up credit card charges. In addition to planned expenditures, save for unexpected emergencies. No one likes calling a professional to deal with a burst pipe, but it’s less of a blow when you can pay with cash instead of credit.

Keep credit accounts current

Devise a system to make sure you don’t forget due dates. It doesn’t matter whether it’s your auto loan, home mortgage or personal credit card bill, failure to pay on time results in late fees, negative credit reporting and potentially increased interest rates as a late payment penalty. Make a habit of paying bills early if you can. Loan companies are often more forgiving of a late payment from a customer with an outstanding payment history.

Keeping your personal credit in shape isn’t hard as long as you’re willing to work with it. A little bit of attention now can save you hundreds or thousands of dollars of frustration in the future.

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Personal Cash Loan Tips

Not every loan must come from a bank or other lending institution. Times exist when a personal cash loan between friends or family members is more appropriate than visiting a brick and mortar business. Unfortunately, mixing money and friendship can be a difficult task, even when a solid relationship is present. Whether you’re borrowing money or lending it, you can minimize the chance of friendship ending loans with five tips.

Written Contract

Borrowing $3,000 from a friend isn’t the same as using his lawn mower. A personal cash loan is a serious financial transaction requiring timely repayment and both parties should treat it as such. Putting all the specifics in writing not only solidifies your commitment to the deal, it allows no room for later disagreement about the exact terms. Make sure you include the loan amount, payments, interest rate – if applicable – and your notarized signatures.

Fair Interest Rate

It’s not just a good idea to offer a fair interest rate on personal cash loans; it’s the law. You can get an idea of the going interest rates for varying loan amounts by visiting lender websites, but keep in mind most banks must follow different rules than individuals. To ensure you aren’t charging a “loan shark” rate, find out the maximum legal rate allowed in your state and stay under it.

Responsible Repayment

Friends are often more forgiving during hard times than lending companies, but that’s no excuse for lax repayment. Treat the personal loan from a friend just as you would an obligation to any other lender. Always strive to make full payments on time, even when your friend tells you take as much time as you need. You don’t want to lose a friend over money.

Responsible Lending

If you plan to lend money to someone, make sure you can afford to be without the funds. Helping someone in his or her financial time of need is a noble deed, but overextending yourself is not the help your friend needs most. When you lend more than you can afford, you may begin asking for repayment every time you see your friend, straining the relationship. On the other hand, offering to help someone using money you don’t immediately need puts less pressure on you and your friendship.

Gauge the Relationship

Before lending money or accepting a personal cash loan from anyone, determine the nature of your relationship. Do you really know each other well enough to enter into a financial arrangement? Do you trust this person to repay the money? Are you comfortable owing money to some you know? If you cannot answer these questions in a positive manner, consider other loan options.

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