Fundamentals of Personal Loan

Try to understand personal loan before applying for it. Personal loans are helpful to supplement money in your account if you are facing shortage of funds. However, personal loan is not recommended always because it is an unsecured loan. Before applying for personal loan try to understand it completely.

Attributes of Personal Loan

Personal loan is an unsecured loan means you can’t use any property such as home for the collateral. This is the basic difference between personal loan and other kinds of loans. Other attributes of personal loan are as follows:

High interest rates: Personal loan offers higher interest rates than that of other types of loans such as mortgage or home equity because it is an unsecured type of loan. But still, personal loan interest rates are lower than that of credit card interest rates.

Fixed Term: Personal loan contains fixed term interest rates in certain cases such as if they can be due at the end of the determined term.

Revolving Line of Credit: Personal offers revolving line of credit same as credit card. In this case the interest rates on personal loan are variable.

No Tax Benefits: Personal loan interest is not tax deductible.

Pros and Cons of Personal Loan

Here are the pros and cons of personal loan that you should know before applying for it.

Pros

• Personal loan is the best available choice if you are in great need of funds and don’t have enough equity in your home or you don’t own your personal home.
• Personal loan offers fixed interest rates in certain cases.
• Personal loan offers lower interest rates than credit cards.

Cons

• The interest on personal loan is not tax deductible.
• The interest rates can be as high as 10% or more. While the interest rates for home equity loans or mortgage are approximately 6%.
• Due to high interest rates you are required to pay more money than that of home equity loan or mortgage.

Still, personal loan is the best available choice for those who are facing shortage of funds and don’t have their own home.

Banks Feeling Loss Over Limiting Debt Card Fee

Retailers have many time requested Congress to limit the charges they have to pay to banks when a customer use his debt or credit card. But this request has never taken serious by the congress and even the Senate has not approved it for hearing.
But now after a long time of pleading, sixty four senators including seventeen Republican decided to implement price control on such transaction from debt or credit card.

This amendment in financial act will save billion of dollars of consumers those who regularly use there credit or debt card to pay there bills or purchase. People mostly do transactions in buying thing from Wal-Mart, paying bills at family restaurants, doing online purchasing through Amazon.com and many other things to which a credit or debt card payment is best.

People also could save money, especially at small business like grocery shops that have great competition on prices. But according to financial experts limiting the charge fee will produce loss for banks and banks may restrict there card to consumers.

Changes in financial legislation are not favorable to banking market but this recent amendment has given a surprise. This may prove to be hazardous for banks.

Financial institutes has shown their great concern over it and are thinking to give less importance to the future campaign of those senators who have participated in this amendment.

How to Lower the Credit Card Interest Rates?

Credit card interest rates are the price that you pay for your credit card balance. These interest rates are shown as APR (annual percentage rate). The credit card issuer gives you a grace period after your credit card purchase to pay off the full balance without getting interest charges.

The grace period consists of 20-30 days normally. If you fail to pay off the balance before the end of the grace period then you’ll get a finance charge on it. This finance charge is calculated by multiplying the interest rate with your balance. The resulting amount that is called the finance charge is added to your main balance and then you have to pay it. Interest rate and finance charge are directly proportional to each other such if you have high interest rates on your credit card balance then the finance charge will be higher too.

Reasons That Increase Credit Card Interest Rate

Your credit card interest can increase anytime even if you start with lower interest rates then there is no guarantee when it increases. There are several reasons that cause increase in credit card interest rates are: if you pay your payment late or after the determined limit then this will lead you to higher interest rates. Your creditor will increase the interest rates by applying the default interest rate on your balance. This nasty plenty can charge you more than 28%. Besides this various credit card agreements contain a universal default clause according to which your creditor can increase the interest at any time. The reason for this sudden increase in credit card interest could be any.

Your creditor informs you about the increase in interest rate before 15 days of this implementation. In this case you have two options, either you close your credit card or continue to pay the balance at lower interest rates. If you choose the second option then inform your creditor in black white before the end of the 15 days.

Credit cards such as department store or gas credit card scores contain higher interest rates. It is wise to pay off balances on such cards to avoid high finance charges. If you want to keep you credit card interest rates low then maintain a good credit score. This is because credit score is inversely proportional to the interest rates such as higher credit score will lead to lower credit card interest rates.

How to Get Lower Interest Rates?

To get lower interest rates the best suitable option is “ask your creditor”. But before asking your creditor, make sure that you have paid off your balance on time and haven’t exceeded from the paying off limit. This step will lead you to the lower credit card interest rates. Contact your creditor and ask him that you want lower credit card interest rates. Don’t forget to tell them that you’ve been receiving lower credit card interest rates offers and you could use these offers if your rates are not lowered by the current creditor. Use a polite way and be determined.