Where To Get Credit?

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Besides commercial banks, there are other places where you can get commerical loans. And some of them can give you better deals as well.

The places from which you can obtain loans include:
 


1. Commerical Banks 
Banks serve the function of collecting money from depositors and then lending this money out to individuals. They oftn have a total package of loans at attractive rates of interest. This is because the cost of funds is low and banks take only the best credit risks (thus the risk and cost of default are low). Demand for bank loans is high, thus banks are selective in the loans they make. The interest rate charged is determined by the selective type of collateral you have as well as the bank's size, which in turn determines how efficient it can be as a middleman.
 

2. Finance Companies 
Finance companies offer the same repertoire of loans except that there must be collateral. In other words, they can only make secured loans. The rates they offer are as competitive as commercial banks as they can accept depositor's money.
 

3. Your Insurance Company
 
Your insurance company may be your cheapest place to get a loan to tide over any financial difficulties. Many insurance companies allow policy holders to take out loans againts the cash value, that is the accumulated saving of your life insurance policy. In other words, you are actually borrowing from your own money.
 For this reason, the interest rates charged are very competitive because the company does not take any risk as the loan is secured by the policy. However, do note that because such loans do not carry a maturity date, borrowers lack the motivation to pay back the loan. 

4. Your Own Company 
Increasingly, some corporations are offering loans to their employees to buy cars and other assets at very competitive rates. You may be able to obtain a cheaper loan by as much as half the market ineterest rates. Check with your human reource department on what your entitltments are.
 

5. Friends and Relatives
A friend or realtive may be willing to lend you money. Such loans are attractive as they carry little or even no interest payments. But this option should only be a last resort because of the potential for conflict or disagreement. It should only be considered if other alternatives are exhausted or if the terms are very atttractive. But before accepting the loan, draw up an agreement which spell out the terms and conditions, and maturity dates. This helps to a great extent in preventing future conflict. 

6. Pawnshops
 
If you have something valuable and need some money fast, the pawnshop may be a source of financing. Pawnshops lend you a sum of money based on a fraction of the perceived value of your item, but take note that they charge a high rate of interest. So use them only if there are no other alternatives.

Importance Of Good Credit

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Behind every great wealthy person is a great bank. To be wealthy, you must have a good relationship with your banker. You will eventually need money to invest in your business, and bankers are the key to inexpensive money. All you have to do is pay yearly interest, which is usually offered at the most competitive rate available. If you go anywhere else for a loan, you're almost guaranteed to pay a higher rate. Therefore, you must make a habit of getting to know your banker. 

Businesses need to borrow money to survive and be profitable. Banks needs to lend money to survive and be profitable. These are two things that never seem to change in the business world. However, there are so many people who got turned down for loans. This is because they don't understand how to borrow money from a bank. Bankers look for specific documentation needed before they can lend money. If you have the qualifications and know the documentation needed and how to present it, you should be able to borrow all the money you need.

What's the key to dealing with a bank? Good credit! The first thing you must have before you approach a bank is good credit. Establishing good credit is vital to the wealth-building process. How to do it? Borrow money and pay it back on time! Make this habit and never be late on a payment. The first thing a banker will want to know is how well you've done in the past regardign your ability to pay back loans on time. He finds out using a report called the credit history. This report will tell you (and your banker) about most of the loans you've had, as well as any late payments on bills or loans. Thus it is good to request for a copy before your banker does.

When your credit report arrives, review it carefully and look for anything that might be detrimental to your credit. If you see any discrepancies that might disturb your banker, write an explanation of your side of the story. Include all the facts, names and dates. When your banker sees the discrepancy, he'll also see the explanation, which might calm his fears.

If you cannot find a bank to loan you money after all the effort, find a family member or friend (with good credit) to co-sign the loan for you. This will enable you to re-establish your credit. Once you've paid off that loan without missing a payment, the bank will be more inclined to loan you money again.

Remember without a good credit record, you cannot borrow money to buy a car, home or anything without paying exorbitant interest rates. A bad credit rating gone unattended will kill your chances of building wealth.