Loan ranger

Whenever people hear the word loan… it more often than not seems like a bad thing. Why is this. Well… maybe that’s because U.S. personal and state debt is at an all time high. With the recent turmoil the global economy is experiencing, loans are the black sheep of the family. It stands to reason that poorly used, loans can result in additional financial hardship. If left unpaid, they can result in default and at its worst… bankruptcy. Bankruptcy then places an individual in an area of financial limbo for several years–this can be crippling and should be avoided at all costs.

Of course, since the financial crisis in 2007/2008, the government has come down hard on loan companies in an attempt to curb personal borrowing and to lower the issuing of loans. We think this is a good thing as any move to responsible lending and borrowing can only serve to make for better industry practices, higher-quality service providers and protected consumers. Used responsibly, loans are a great way to leverage one’s earnings. Maximizing what you earn against a low-interest loan can be an excellent way to grow wealth.

The pitfalls to keep an eye out for are many. Car loans, for arguments sake, can be expensive on two fronts. Firstly, the interest rates are traditionally high, which means borrowers pay more for their car than the advertised sticker price. This can be difficult to see as the total borrowing amount might not necessarily be advertised at point of sale. Secondly, the car itself will devalue over time. This is a double whammy for borrowers as the interest charged on the car loan inflates the purchase prices, while the car loses value almost straight after it has been bought.

Other things to look out for–payday loans. This type of loan was introduced to provide a quick and convenient way for people to gain access to short-term loaned funds. This sounds like a great idea in principle… but if you ever consider such a loan, then always remember to read the fine print, as this is where they make their money. Interest rates can initially be quite low… however… should payments be missed… then the agreed interest rate soon sky rockets. Borrowers are then caught in an ugly trap. As if the initial interest rate wasn’t high enough… most are forced to default on payments, which results in court action. Following on from the court ruling in favor of the lender, bailiffs are authorized to take from the borrow anything from the borrower’s personal possessions that meets the value of the outstanding loan. The items that are retrieved are then sold. You can usually find items like these in pawn shops.