7 Things To Remember When Borrowing Money

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Whether you're starting a small business, remodeling your home or just paying some bills, from time to time you'll need to borrow money. Whether you choose to use your line of credit or take advantage of some equity in your home, you'll want to know what you're getting yourself into before you sign the deal. Here are some things to consider.

1- Shop for the best interest rate

The main thing that you'll be comparing when you're looking for a loan is the best interest rate, which is essentially the price of the money. It's easy to fall for a good sales pitch, but a prudent borrower does his homework. Ask several banks for quotes and then do the same with brokers. You'll get an idea of the price range, but don't be afraid to tell the lowest-priced broker that you think he can do better, especially if other quotes are close. Of course, you need to make sure that you're comparing apples to apples, so be certain that your loan quotes reflect the same amount and time period, and be sure to account for fees.

2- Consolidate your loan

Loan consolidation can have two advantages:It's easier to manage one bill at the end of the month instead of three or more.You can lock in a low interest rate.

Of course, you take a risk; if interest rates continue to drop, you may not be able to reconsolidate, which means you'll be paying more for your money. But if they rise, you'll be sitting pretty.

3- Use equity

Your home equity is actually your money, and sometimes it pays to use it. You can take equity out (essentially, get a check from the bank equal to some or all of your equity), or you can open a line of credit against your equity (essentially using your home as security for the loan). Because this is a secured loan, you should get a better interest rate than a credit card, but on the downside, if you default, you could lose your home. If you take out a home equity loan, make sure you do so to finance a worthwhile project.

Use that line of credit and whatever you do, avoid payday loans...