Reducing your overall debt level as much as possible is always a good idea, and is usually recommended as part of a budgeting plan. If you have some spare funds available, you might be tempted to clear your personal loan, as nearly all loan plans allow for full repayment before the term is over. However, there are a few things to bear in mind before deciding whether paying off your loan is the best use of your spare cash.

Firstly, loan providers make their profits by charging interest, and if you clear your loan early then you won't be paying the lender as much interest as you would if your loan went to its full term. Obviously, this means they will make less profit out of you, and so many lenders will write an early repayment penalty into the loan agreement to make sure that the arrangement is still profitable for them if you repay early.

This repayment penalty, also known as a redemption charge or a settlement fee, will often take the form of a percentage of the outstanding balance at the time you clear your loan, and depending on how early on in the repayment schedule you are, this could work out at quite a substantial amount. Check your credit agreement small print to see how much you could be charged, and see if this makes the prospect of early repayment quite as attractive.

If the fee is substantial, you could be better off by putting your spare funds to another more cost-effective use.

Most credit cards and other kinds of debt will charge a higher rate of interest than a personal loan, and so concentrating on reducing these first may be a better use for your money. By clearing your higher-interest debts first, your spare cash will be having the most beneficial effect.

Even if you don't have another debt to clear, you may find that there's a better way to use surplus cash than paying off a loan that features a high settlement fee. Investing in a high interest savings account or bond over the remaining term of your loan may earn you more in interest than the cost of a redemption charge, but when calculating this be sure to take account any taxes you'll have to pay on your investment return.

Finally, don't underestimate the importance of having a little money in reserve. If clearing your loan would leave you with very little spare cash, then an unexpected expense could push you back into the red. If this would mean you had to take out a new loan, then a new deal may work out to be more expensive than keeping your current loan to its original term.

To sum it up, paying off your loan is a commendable aim and to be recommended, but before you do so make sure that any settlement fee doesn't make early repayment uneconomical, that you couldn't use the money to reduce more expensive debts, and that by clearing your personal loan you won't be leaving yourself too short of money and in danger of going back into the red.

Most of us understand the advantages of owning a home versus renting one. However, we also know that it would be extremely challenging to arrange for the finances without some help. And so we decide to borrow money from banks and mortgage lenders, in order to fulfill our dream of owning our homes. Here is a guide to help you understand basic concepts of home loans:


Mortgage: A mortgage is basically the pledging of property to a creditor as security for the payment of a debt (Webster). Essentially, when you take the loan, you agree to let the lender hold the title to your house until the debt is completely paid off. You are also empowering the lender to sell your house in case you can't make your mortgage payments.


Paying for your house includes arranging for the down payment, the mortgage payment (which consists of the principal, the interest, taxes, and insurance – referred to as PITI), and closing costs.


Down payment: This is the lump sum you pay upfront – you are required to pay some of the money for the house from your own savings. The greater the amount you can arrange for the down payment, the lesser the amount you have to borrow – this translates to lower monthly installments. Typically, you need to arrange at least 3 to 5 percent of the purchase price on your own.


Principal: The total amount of money that you are borrowing from the lender is referred to as the principal. Usually the principal is the cost of the house minus the share that you are paying (down payment).


Interest: Why would the lender bother to lend you money? To earn interest, of course. The interest is basically an amount over and above the borrowed amount, that you are paying to the lender in monthly installments in addition to the principal you are returning. The interest rate is usually decided at the time of finalizing the mortgage arrangements – it can be fixed or variable.


Taxes: You are required to pay property taxes – the amount for this is often set-aside in an escrow account. What this means is that the money is placed in the hands of a third party until it is time to pay or certain conditions are met. A part of your property tax is added to your monthly mortgage payment. The amount is then held in escrow until it is due.


Insurance: Insurance can be of different types - hazard insurance (to protect against losses from fire, storms, theft), flood insurance (if you live in a flood risk zone), and then there is the private mortgage insurance or PMI that you will have to pay (if you have less than 20 percent equity in your home).


Closing Costs: Besides the abovementioned costs, you will have to arrange for closing costs. Closing costs include loan origination fee, discount points, appraisal fee, title search, title insurance, survey, taxes, deed-recording fee and credit report charges. These costs are also known as ‘settlement costs’.

A low rate home equity loan is a good way to get some serious cash in a hurry without risking everything in the process. This method of obtaining a loan is gaining wide spread acceptance because there is very little risk involved. This comes with the fact that the money is coming from the funds that you have already put into your home and therefore is actually your money if you think about it. This is why there is so little risk involved and it is easy to get the loans because you already have a proven track record of paying and they are doing nothing more than cashing out what you have already paid in.

There are a few things that you should do to make sure that you are getting a low rate home equity loan. First and foremost you should be sure to read over the agreement carefully before signing. This is common sense but many would be surprised to know how many people just sign and take the companies word that they are getting the best. Before you know it you could be involved in something that is above all else, bad. This can mean losing the home that you have worked so hard to pay for and that will spell disaster. Of course there is little that anyone does not know about loan companies, they are after their money and that is what really matters. So you should make sure that the low rate home equity loan that you are signing up for is going to stay at the rate that you are signing up for. In some cases the companies reserve the right to raise the rate as they see fit and that can mean a good many bad things.

Of course the low rate home equity loan should also be something that you want to receive. There are several lenders out there that are known as predators. These types of companies will make attractive offers that you did not ask for and in the end they will talk people into cashing out when they really have no reason to do so. In these cases the homeowner is the one that loses. These companies will charge the highest fees in the business and make it very hard to pay back the loan. In the end they will end up owning the home and you will have nothing to show for the years that you paid in.

With higher education costs on the rise, many people these days have several student loans. These are not just medical students with several loans, but average students at public universities. It can help for those trying to pay them off to consolidate student loans into one bill and thus one payment. There are many advantages to having one loan besides the single payment each month though. Some that you may not be aware of are lower interest rates, a way to improve your credit rating, lowering monthly payments.

Applying for an individual student loan can lower the interest rate because places offer incentives to use them for the loan. Some companies offer a lower rate for having the monthly payment automatically deducted from your account. There is also a benefit by making so many consecutive payments, on time, and that showing will lower the interest rate. This of course will make your payoff amount decrease since more money will go to the principle instead of interest.

Having a single student loan can help your credit rating because of how your credit score is figured. Part of the score is made up of how many outstanding debts you have as well as the total amount due to each. Getting a student consolidation loan will give you a higher loan amount due but only for one loan and not the several others that you currently may have. Thus, your score will go up and even get better as you pay off that loan. It will not be an instantaneous fix as credit companies can take up to six months to report a drop of a loan off your report. But if you don’t use your credit unwisely in this time period your score will raise and when you do apply for something at later time you can possibly get a lower interest rate for that loan as well. Which will have you making lower payments on that item and help you pay off that loan faster too?

Of course a single payment with a lower interest rate is going to give you lower monthly payments. Owing several companies with their own payment rates can make the total paid each month much more. One lump payment is going to be lower just for the reason that only one creditor is loaning the money with one rate. And each of these companies will have their own interest rate, which changes the payment. An individual loan will have more of the payment going to pay off that loans interest and principle at once over several loans where it can vary from loan to loan how much is paying it off. And most importantly right now rates are very low and getting a consolidation loan can also have you paying less because your rate can drop tremendously, depending on what it was before. While it can start your loan term back to the length it was when you got the student loan, with lower payments and a lower interest rate, you should be able to pay it off even faster and get out of student loan debt quicker than if you kept the individual loans.

Inevitability for any growing business enterprise is to seek new funding. For many small companies, individual owners may not have enough cash on hand to attain the capital in order to finance the growth that their company needs. In these situations it is time to consider a business loan. But now what? The answer is turn to a lender or financer. You obviously have a lot of lenders you can do to, but who should you pick? Identifying a good lender isn't easy. As our company grows, the demand for money for new investments may increase and you will need good relationships with a lender to meet your investment needs. Hence, it may be smart to think about finding a business loan lender even before that critical date when you will actually need the loan.

Searching for Good Financers


If you need sizeable funding for your new business venture or expansion, why not go for "best in the business"? First, do a round of identification on the Internet and business journals to zero in your search for good lenders. The goal here is not to make a selection, but to merely lower your list of available down to 10 or 20 lenders.


Be prepared with your business strategy, financial statements, tax returns, etc. as lenders will like to have a look at that first before processing your loan application. Also, keep your options open with smaller banks, as they might be more than interested to finance your business goals (and you might also get more individual advice, which big names often don’t give).

Preparing to Apply

Usually banks look at substantial operating records prior to offering a business loan. To increase the chances of acquiring your company’s loan, you need to create a healthy atmosphere for banks to feel confident about you; confident that your company will handle cash-flow properly and that this business will be able to meet its monthly bills. It is also important that have done your homework on the need of money and the term of the loan. That enhances your chance for objective negotiations with bank, which works in your favor.


Showing off your personal savings works wonders to make a deal with the bank. They also look at business interests, organizational knowledge, and experience in the field of business, among other things. Banks reasonably eye the company's leadership, because ultimately a company’s leadership is responsible for its success. Also, be prepared to explain your alternate strategies or back up plans in order to maximize your chances that the business venture won't fail.

Look Good on the Big Day

Finally, it’s always important to look and act professionally. The last thing you want to do is not get a loan because you look unprofessional. Further, make sure that your paperwork is organized and professionally laid out along with your repayment plan. Your repayment plan needs to be ready to show the focus and responsibility your company stands for. Finally, bring into the bank interview any additional positive information you have about yourself and the other leadership team, such as other collateral, other business records, and your personal and company credit report.