Local News Update

Learning When To Borrow

Hello my name is Marquis Rogers and i am your financial advisor

Not a lot of people know about how and when to borrow money or can they afford to pay it back. Well that's why I'm here, think of it has your second conscience. Now before you start borrowing money you need to make sure your credit is okay. Your credit is the ability to obtain goods or services before a payment. You might want to take in consideration on making a amortization schedule. It's a table detailing each periodic payment (like a mortgage).Also you might want to check it periodically to make sure no one committed credit fraud. There might be some purchases that you have not made especially if it was a big purchase. it can really damage your credit and can take a really long process to issue credit fraud.

Next is the 5 C's of credit

It is a method used by lenders to determine the credit worthiness of potential borrowers like you. You got;

  1. Character
  2. Capacity
  3. Capital
  4. Collateral
  5. Conditions

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Now let's cuss and discuss

You may be thinking that this is a lot of information and i'm not even close to the end. Well trust me this stuff will get a lot easier because everyday you will use these methods and you might even realize it. One of the methods is called simple interest. It is a quick method of calculating the interest charge on a loan.Think about it whenever you leave the house what is the first you do or buy? If you was planning on moving or just cruisin in your neighborhood you would look at people houses. Or if your planning to get a new car you would look at all the car dealership commercials and might even go up to one. I'm saying all of this because your credit needs to be good. You don't want to take a loan if your credit looks shady, they might not give it to you.

Advantages and Disadvantages

The advantage is you have complete control of money the bank loaned. They can even offer access to a wide array of terms like fees, application requirements and interest rates. And can be usually negotiated and adjusted. Disadvantages, since it is your responsibility to pay them back the loan if you fail to do so they can pretty much take everything. Also keep in mind that the interest rate can rise, making it very difficult to pay.

Introductory APR vs. APR & Fixed Interest vs. Variable Interest Rate

Introductory APR is an annual percentage rate is a low rate offered by a credit card company as an incentive to apply for the card. It will go up after the introductory period is over.

APR is a numeric representation of your interest rate . When deciding between credit cards , APR can help you compare how expensive a transaction will be on each one.
Fixed Interest it's a loan where the interest rate doesn't fluctuate during the fixed rate period of the loan. This allows the borrower to predict their future payments.

Variable Interest Rate it's a interest rate on a loan or security that fluctuates over time. Because it is based on an underlying benchmark interest rate or index that changes periodically.

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More Info.

Principal (of money) is denoting an original sum invested or lent. Ex: The part of a monthly payment that reduces the outstanding balance of a mortgage.

Rate is the interest rate on a type of short term loan that banks give to brokers. The brokers turn in the money to investors to fund margin accounts.

Time is money available at the present time is worth more than the same amount In the future due. This core principal basically holds provided money that earn interest plus any amount of money is worth more the sooner it is received.

The 20-10 Rule basically helps you understand how much you can afford. So you can avoid borrowing more than 20% of your annual net income and not exceed 10% of your monthly net income.

Tips for borrowing and Myths

Make sure to spend time shopping around, working out your budget before you borrow, never borrow money on the spur of the moment, avoid going overdrawn on your bank account without agreement, and most importantly never EVER borrow from Loan Sharks.

  • Myths
  • All debt is bad
  • Leverage is too risky
  • Leveraged investing is only for the rich
  • Returns have to equal your interest costs
  • Interest costs are always tax deductible

Ex. for Credit Cards and how interest works with monthly payments

Interest is calculated as an annual percentage rate of the amount you borrowed.

For example, if you borrow $100 at 6.8% interest, at the end of the year, the interest you’ll owe on your loan will be $6.80.

In this example, your estimated daily interest is around 2 cents per day ($6.80 divided by 365 days in a year).

Credit cards provide you with a revolving loan—or credit limit—based on your agreement to pay at least the minimum amount due on the amount of credit you use by the payment date. A finance charge is applied to the outstanding balance—the amount you do not pay by the due date. For example, if you purchase $200 in one month and you pay the minimum amount due of $15, you will pay a finance charge on the outstanding balance the next month.

Different Interest Rates

There are many different types of interest rates and some are cheaper than others. There are mortgages, auto, student loans, credit card, etc. It all depends on if you know how to spend money without hurting your credit. Paying them back on time every time your credit bill is due. And keeping away from loan sharks. And you will do just fine I faith in you.
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