Make Sure You Know the Other Loans
Although home mortgages and car loans are two of the most common varieties, there are many different types of personal loans that an individual may choose to apply for. Debtors may have trouble obtaining line of credit loans if they have a poor credit history or a low credit score. Generally, a low credit score will indicate that a borrower has had trouble making his/her monthly payments, or that he/she has failed to pay debts all together. In instances such as this, creditors may choose not to grant an applicant credit because he/she is a risk.
Individuals who are experiencing this problem may choose to apply for personal loans known as “bad credit loans.” These personal loans may include line of credit loans, or installment loans for the purchase of a large item, such as a motor vehicle. Bad credit loans may be beneficial to an individual who is unable to obtain a customary loan from a bank or a credit union, because a lender will generally not run a credit check on an applicant.
Applicants may be granted unsecured line of credit loans. However, creditors will charge unusually high interest rates for debtors who are granted bad credit loans. Moreover, the terms and conditions of these types of personal loans are strict. If an individual utilizes a bad credit loan in order to purchase a motor vehicle, the vehicle may be repossessed by the lender if the debtor is late on one payment. A payday loan is another type of loan that a consumer may apply for if he/she has a poor credit history.
An individual who applies for a payday loan will be granted a small line of credit, usually $500, for a specified period of time. The borrower will be required to provide the lender with a check for the sum of the specified monetary value, and the interest that the lender charges. The lender will not cash the check until the date that the creditor and the debtor agreed upon. If the borrower is unable to produce the money to cover the check by the agreed upon date, he/she will be required to extend the loan.
This means that the debtor will be required to pay the creditor double the interest. The interest that is associated with these line of credit loans tends to be almost absurdly high, and therefore, payday loans have been outlawed in many states. Other types of personal loans that an individual may choose to apply for include home equity loans and merchant loans. When a debtor takes part in a home equity loan, he/she uses his/her home’s equity as collateral for credit.
These types of loans are often utilized in order to pay for a child’s college education, or to purchase necessary equipment for a small business. Merchant loans are line of credit loans, in which a business grants a consumer a specified amount of credit so that he/she can purchase goods from that corporation. They are credit cards that are only valid in a specific store. While all of these types of personal loans may be valuable in certain situations, it is important to be cautious when dealing with credit. If a borrower is not careful, he/she may accrue unmanageable debt and find himself/herself in a financial crisis.
Understand the Concept of Utility Credit
When individuals utilize consumer credit, in basic terms, they obtain items and pay for them later. Utility credit is based on the same fundamental concept as consumer credit. An individual will receive necessary services now and he/she will pay for these credit services later. Utilities are one of the many types of credit services that permit an individual to pay for the labor or the resources after they have been used. Some of the most common and most important utilities include gas, water, electricity, and phone service.
Utility credit, in short, is one of the credit services that is essential to everyday life. Utility credit is a credit account, much like a credit card account. An individual will be required to pay a utility company for the services that they provide, and the lender will keep records of the borrower’s payment history. In most cases, payments will be made on a monthly basis. If an individual is unable to pay a lender for the utilized credit services, than the debtor may be refused access to important utilities. The large majority of homeowners will establish utility credit by employing these credit services.
Proper credit management is essential to maintaining a viable level of utility credit. Every utility company will maintain records of its’ borrowers credit histories. If an individual misses a monthly payment, or if he/she is late on numerous payments, this will translate into a poor credit history. If an individual does not ensure adequate credit management, he/she may experience unpleasant repercussions. For example, an individual who fails to pay his/her water bill will have their water turned off.
Likewise, if electric bills go unpaid, a debtor will have his/her lights shut off. A history of effective credit management is essential if an individual wishes to change utility companies in the future. A utility company will review an individual’s utility history in order to determine whether he/she is a high-risk investment. If a utility company feels that an applicant is financially irresponsible, or if they believe that there is a chance they will not receive timely payment, a utility company may refuse to provide services to an individual.
Poor credit management may result in the necessity to provide utility companies with a deposit when seeking a new lender. Many utility companies require new customers to provide a security deposit when enlisting the use of their services. It is possible for a utility company to only require a deposit from an individual whose utility credit history displays evidence of financial irresponsibility.
By requiring an individual to provide a deposit, the utility company will be compensated if the borrower fails to pay his/her first month’s bill. In some cases, a woman may have trouble attaining utility credit if her utilities were previously listed in her husband’s name. Credit discrimination against women is illegal and should be reported to the appropriate authorities.