Four Rules for Using Personal Loans Wisely in the New Year

[Dec 25, 2009.]

 

2010 is not quite here yet, but that should not dissuade people from thinking about the ways that they use--or misuse--credit, including personal loans. Far too often over the last decade, both borrowers and lenders have thoroughly abused the borrower-lender relationship.

This irresponsibility on the part of borrowers and lenders contributed to the greatest economic disaster of the last 70 years.

It would be fantastic if both borrowers and lenders could start 2010 strong. Here are four rules personal loan borrowers can use to do their part:

1. Demand Understanding

Personal loans have won fans by the simplicity of the agreements they are based on. In stark contrast to the style of credit card lenders, personal lenders have been pretty good about keeping agreements simple and understandable to borrowers who are not trained attorneys.

But this is not always the case. Therefore, it is imperative that borrowers demand understanding and never sign off on a loan that is not clearly defined.

2. Go Small

The first 10 years of the 21st century saw the "go big" mentality writ large. One unfortunate result of this mentality gaining popularity is that many people now have too much debt.

When taking out an unsecured personal loan in 2010, go small if at all possible. Make every dollar of that personal loan count.

3. Personal Loans vs. Credit Card Bills

As we've blogged about before, now is probably the best time in the history of the world to settle credit card debt. Certain banks and credit card companies, in fact, are as desperate for cash as certain consumers and borrowers.

The catch to settling credit card debt for less than is owed is that the money must be paid up front, right now. This is where a fixed rate personal loan can come in exceedingly handy. Wiping out three credit cards with one personal loan can be a great start to 2010.

4. Don't Give Up on Having Good Credit

With all the foreclosures, bankruptcies, and delinquent bills that have been going around lately, the temptation for many borrowers is to throw in the towel as far as having good credit. Even people who formerly had good credit may feel like "it's all over now."

This can be disheartening. It may also turn out to be untrue. As banks regain health, they will seek to lend again. Likely they will find ways to get bad credit borrowers approved for loans.

Having a demonstrated record of taking out online personal loans and paying them back on time and in full could be one way the bad credit borrower can show that bad credit may be, in this case, a bad rap.

 

About Author:

Andrew Freiburghouse is a writer and businessman. He has worked as a magazine reporter, tax preparer, screenwriter, copywriter, and loan officer. He graduated from Santa Clara University in 1999 with a B.A. in English. Andrew was born and raised in the City of Los Angeles.