Lower your Costs of Borrowings

Cost of Borrowing trend

The first thing to learn when adopting credit lines and cards is to understand how these facilities work as the cash does not belong to the borrower but leveraging on the bank's credit. The current interest rate is pegged to the Inter-bank rates and definitely competitive among professional institutions. The US Federal Chief Ms. Janet Yellen has the authority to control inflationary mobility and interest rate hike in 2014 & 2015 has yet to become a reality. Hence, the cost of borrowing from banks still remain low till date, year on year. In order to escape the harsh punishments, retail borrowers must have an objective to reduce unwanted expenses being incurred especially from interests charged from the respective moneylenders. In this way, they can avoid being penalized or improve on credit rating and credit scores.

Fixed & Variable factors affecting Credit

Credit decisions must be justified based on two main factors; Fixed & Variable. For the Fixed segment, the loan repayments usually in installments cannot be altered after signing the contract and the debtor is liable to repay on a timely basis. Another fixed factor is the loan tenor whereby the borrower has to observe the required duration and stick to it. If the lendee wants to finish outstanding payments earlier, it is possible, of course the bank is more than willing, but may face an early penalty for early settlements. Why is it so? This is due to the lesser interests being charged over the stipulated time frame for creditors to generate income.

There are quite a few variable costs and most of them fall under the uncontrollable realm. The first point to take note is the floating interest rate type. If an individual borrows a personal loan and based it on the current market demand which, at year 2015, might not be as pleasant as the previous term. Another variable factor is valuation of loans. Assuming taking up a mortgage loan, once the economy is not doing well, banks revaluate the current housing prices, saw declines in housing valuations, seek advance cash payments to top up the difference.

Long term Credit costs mitigations

It is going to be a long drag once the borrower is unable to service the loan installments by remitting monthly interests only. This detriments the credit score as well as the financial well-being of an individual through incurring massive debts and bills. In the long run, the costs might add up to consierable sum or even surpass the current loan principle which not many are able to facilitate properly, resulting to poor credit ratings. Before signing on the dotted line, do remember that you have a contingency plan or somewhere that has the powers to clear off. Going forward, terminate credit facilities to prevent such cases from happening again. Once bitten, twice shy, no?

Possible ways to Avoid high Credits

When there is a Will, there is a way. Do your best to clear off high-yielding interest rates as it is going to be insane in servicing loans that exceed the cost of capital. The very first moment is to destroy all existing credit functions. This piece of news come over and over again in avoidance of potential outstanding credits. Another impressive method is to seek funds from good friends or relatives as there is no direct legislations. Based on statistics, those who did not owe money to anyone leads a happy life as well as doing good in their career prospects. The ending phase of working life needs to be peaceful and not hot on wheels.