Secured Credit Cards
Choosing to improve your credit rating is an honorable decision. Unfortunately, if you have a negative credit rating, it can be difficult to apply for credit. Lenders do not want to give their money out to individuals who do not already have a good reputation of making payments on time.
If you are having trouble getting approved for credit cards, you might want to consider applying for a secured card. With most credit cards, you have a limit of funds that you can borrow and you are trusted to make a minimum payment each month. Most credit cards allow borrowers to spend funds they do not have, as long as they pay the lender back later.
With secured credit cards, you give the bank a specified amount of money for collateral and then your credit limit is based upon the amount that you paid. So, if you give $500 to the lender, your credit limit will be between $250 and $500. You then make monthly payments just like you would with a regular credit card.
Because you are not actually borrowing money, almost anyone can get approved for one of these cards. Giving out these credit cards is not a risk for the credit card companies because you have already paid the equivalent to the minimum payments, so they are guaranteed to not lose any money.
The primary benefit to having one of these credit cards is that you can build credit even if you cannot get approved for unsecured cards. After a certain amount of time, you will build enough credit to get approved for regular credit cards.
The downside is that you have to pay a large sum of money up front. Chances are that if you have bad credit, you probably cannot afford to hand over $500 or more to a credit card company. If you do apply for a secured credit card, do not borrow the $500 from a cash-advanced company. You will end up paying extra money and it will not be worth it in the end.
Another disadvantage is that you will not receive the benefits that come with regular credit cards. Most credit cards offer some kind of rewards or cash-back program. Secured credit cards almost never come with incentives. It also does not feel like borrowing money since you paid the bank the equivalent or higher than the credit limit.
When applying for a secured credit card, keep in mind that the point is to raise your credit score. Secured credit cards should not be used to purchase things you cannot afford. The best way to use your secured credit card is to make very small purchases each month. Then you should pay off the balance right away. Your credit will usually significantly increase within six to nine months.
If you are considering taking out a secured credit card to improve your credit, you should shop around to get a good deal. Websites like moneysupermarket allow you to compare the rates and incentives of various unsecured and secured credit cards so that it is easy for you to make a good decision for your future credit.
Is it Always Worth it to Refinance a Home Loan?
You may have been advised to refinance your home loan. Refinancing is a process wherein you would be able to settle or pay off your current home loan through a new loan, which should feature a much lower interest rate and better terms. It is like renewing your mortgage using another one.
Refinancing home loans is gaining popularity as years go by. This is not surprising. Many home loan borrowers have applied for and obtained refinancing especially during the onset of the recent global financial crisis. Are you having a hard time repaying your current home loan? You may avoid hefty penalties and possible default through taking the option to refinance your mortgage.
It is always worth it to refinance a home loan. Numerous home loan borrowers could attest to this. It is actually a strategy to make the home loan more affordable so you would not have to face budget constraints whenever you need to make your monthly amortisations.
Lower interest rates
What most borrowers rave about home loan refinance products is the much lower interest rates. Yes, you could now cancel your current mortgage with astronomical rates. You could always find much more attractive rates. If you succeed in doing so, you could effectively lower your mortgage and of course your monthly repayment.
Such an activity may not be possible if you would stick with your current mortgage. Lenders hardly agree and allow re-adjustments of interest rates. Thus, you would end up paying expensive rates if current interest rates prevailing over the market fall.
Longer terms
Because you are getting a new loan, it is like renewing your mortgage to take another term. However, as mentioned, the overall cost would be lessened because of the lower interest rates applied. You may opt to extend the loan for two, three, or four years (even longer). The longer the term, the lower the monthly amortisation gets.
It would not be ideal if you intend to de debt free soon. But it is for you if you are on the verge of default because you could hardly afford the interest rates and monthly amortisations.
Using the loan for other purposes
Some home loan borrowers intend to use the mortgage refinance plans for other purposes, whether for investments or businesses. This could be possible if your remaining balance on your old mortgage is already minimal. Thus, you do not have to make other costly or secured loans. Your home loan refinance would do.
What’s more? Such products are never hard to find. Those are even easier to obtain. You could opt to take any refinancing product from your current creditor or lender. Doing so would spare you from all the rudiments and tediousness of the loan application process. Or you could opt to get the refinance loan from another lender, which offers much better rates and overall terms. Either way, you could be sure you would be standing to benefit from applying for and obtaining a home loan refinance.
About the Author: Andrew has been writing about refinance solutions for the last 2 years. Andrew is also a regular writer at Australian Lending Centre
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