Managing Your Money
Borrowing money - through either a bank loan or a credit card - can give you incredible flexibility to purchase needed items when you don't have the necessary cash on hand. But credit cards and bank loans also come with a price. If you're not careful, you could end up with high interest payments that make your loans very expensive. If you borrow too much money, you could run the risk of overextending yourself. This could keep you from meeting your financial goals.
Getting Credit When You Need It
Even if you're not looking to borrow money in the foreseeable future, it's important to begin now to make sure you'll be a good candidate for credit when you need it. Start by following these steps:
Establish a good credit history. You do that simply by paying your bills on time and checking your credit report each year to make sure it's accurate. For information, see Check Your Credit Report.
Use your credit card, if you have one. It's important to use your credit card, even if it's only occasionally. This keeps your credit history active.
Don't take credit denial lying down. Older people sometimes have trouble getting credit, even though they have fewer bankruptcies, a lower default rate on consumer loans, and less debt than young people do.
Know your rights and responsibilities. Three major laws protect borrowers from unfair practices. They are the Fair Credit Billing Act, the Fair Credit Reporting Act, and the Fair Debt Collection Practices Act. For more information visit the Federal Trade Commission Web site's on Fair Credit Rules.
Being a Wise Borrower
To avoid taking on too much debt, set realistic spending and borrowing limits. Be sure to assess carefully any loan agreement you sign. In particular:
Get in the habit of using your bank debit card to make purchases. Debit cards give you the convenience of a credit card, without the high interest payments.
Beware of predatory lenders who promote their services to those who may be financially distressed. These lenders charge high interest rates. They also may use aggressive sales and collection tactics.
Be careful when using the equity in your home to secure a loan for home improvements. For more information, see Financing Home Improvements: The Basics.
Get help if you become overextended with bills and debts. There are a number of services that can help you untangle your financial affairs. For more information, see Do You Have Too Much Debt?.
Reverse Your Mortgage!
Consider a reverse mortgage if you are 62 years of age and own your home. A reverse mortgage is a loan on your home's equity that requires no repayment for as long as you live in your home. For more information see Exploring Reverse Mortgages.
