Personal Finance Tips

Based on bank lending practices, one might be misled to believe that people with a bad credit history are not capable of running successful businesses, unlikely to repay business loans, and overall, risky borrowers. But the truth of the matter is; having bad credit does not make a person incapable of running a profiting business.

There are many reasons why a person might have a low credit score that may have no relation to their money management skills. These include having obscene amounts of student loans to repay after graduating before getting a job that can support those payments, and getting caught in the lure of credit cards as a young adult and having to pay for it later. But in the end, these mistakes can serve as a learning experience, teaching a person to make wiser financial decisions in the future and making them better equipped to handle financial problems that are presented within their business.

The question remains: Is there hope for business owners who have poor personal credit histories? Is there a way to get a bad credit business loan?

The answer is yes. Through a business cash advance, a business owner can get a loan for his/her business even if he/she has bad credit. This is because business cash advance lenders take the strain of repayment off of the borrower, making the business responsible for repaying a loan.

How does this work? A business cash advance is a purchase of a business’ future credit card sales. Business cash advance companies provide an up-front cash payment in exchange for a small percentage of the credit card sales that a business makes until the loan is completely paid off. Therefore, having bad credit is not a disqualifying factor when it comes to receiving a business cash advance.

The repayment of a business cash advance also has no affect on a borrower’s credit score. So the borrower does not have to worry about worsening his/her credit score when receiving a business cash advance.

Many Americans do not have the 700 point credit score that is usually required to receive a business loan, but that does not mean that their dreams of running a successful business should be shattered. Fortunately, the availability of business cash advances gives business owners with bad credit another option, making it possible for them to finance the development of their businesses.

Personal loans are loans that can be either secured or unsecured. (Usually they are unsecured.) Personal loans are for unspecified purposes, unlike mortgages or car loans, which are made for specific purposes. The proceeds from a loan, like a mortgage or car loan, are usually paid directly to the seller of the property. The proceeds from a personal loan are given to the borrower and he may use the funds in any way that he wishes. Sometimes a personal loan that is not secured is called a signature loan.

A personal loan is different from a credit card, store card, or gas card balance in that there is a repayment schedule. Regular (usually monthly) payments are required, and the loan is for a fixed period of time. Credit cards, etc. have a minimum payment requirement, but a personal loan has a specific periodic monthly payment.

Ordinarily, personal loans are made by banks to people who have an excellent credit score and an unblemished (or nearly unblemished) credit history. The interest rate on a personal loan is usually slightly higher than the interest rate on a secured loan.

However, sometimes people who have bad credit or no credit can still get an unsecured personal loan. Lenders view these potential borrowers as people who are trying to reestablish a good credit rating and, although they do not have personal property to use as collateral, they do have a job, and they do have the financial ability to repay the debt.

The interest rate on an unsecured personal loan will be high. The borrower will have to prove that they have a job and they can be reasonably expected to make the set monthly payments. The advantage of an unsecured personal loan is that it gives the borrower an opportunity to repair their damaged credit rating.

Many big US banks as well as multinational banks are now providing the facility of credit cards with zero interest. Often labeled “credit cards no interest” or “credit cards zero interest”, the main benefit of the credit cards with zero interest is that there are no interest rates applicable on the usage of the credit cards.

For a long time credit cards have been a source of money assisting in the purchase of everyday items. Zero interest rates imply that people can use the credit card freely. As such, these cards prove to be beneficial to the consumers. People who do not have enough cash during a certain period can use the credit cards and later return the cash to the provider of the credit card. Historically, banks have taken very high interest from the users of the credit card.

As such, not many people were able to use the credit cards. However, since the evolution of credit cards and now some with zero percent interest even people with low but steady income are able to use the credit cards. The popularity of this type of credit card is increasing day by day. However, there are still many people who are not able to acquire this type of credit card.

Initially, to acquire the credit cards with zero interest, an individual had to keep some amount as a deposit with the banker that was providing the card. This deposit is sometimes more than the limit for which the card can be used. Still in this modern time, in certain parts of the world these cards are becoming important mainly for the salaried people. The salaried people of developing nations do not have the same amount of money all throughout the month and often face financial problems at the end of every month.

Once they get their paycheck they keep on spending the money for household, and personal use etc. Hence, the amount of money keeps on reducing, and at the end of the month it may give rise to financial crisis. Therefore, they take the help of the credit cards during the time they do not have enough money.

In this type of situation, zero interest credit cards can be very helpful. Although hard to get, they are worth working for.

Credit cards are here to stay for the multiple benefits associated with them. We already know that credit cards act as a convenient payment mode for shopping, they are safer to carry as compared to cash, they help build a credit rating which can be used for getting fast approval on loans etc, and they are there to help when you need credit. However, there are other benefits too which one should be aware of as well. Let’s check what these other benefits are:

1. Travel Insurance

A lot of credit cards have travel insurance built into them as an inherent feature. So if you are one of those who travel frequently, this benefit could be a real boon. However, you should always check if this travel insurance is enough for you. Also check the terms and conditions associated with such insurance. Loss of baggage is something which is almost invariably covered with such insurance.

2. Discounts for travelers

A number of credit card companies have tie-ups or association with various hotel chains, car rental agencies and airlines etc. For frequent travelers, this is sometimes one of the main criterion or deciding factor in choosing a credit card. These discounts are sometimes pretty attractive and your credit card may become a cash saver for you. Sometimes an airline might offer a credit card too (a co-branded credit card for example) where-in the benefits would be more travel oriented than other cards. This could include things like earning additional miles for payments made using their credit card or some kind of preferential treatment etc.

3. Discount for shoppers

If you are one of those who likes to shop at some particular shops (retail chains) which are your favorites, then you might like to check if you have some additional benefits available on your credit card. These could be there as a result of partnership or affiliation links with the retail chain. Whenever you pay for your purchases using your credit card, you either get a discount or additional membership rewards points. Some of the retail chains float their own co-branded credit cards too and it could be good to consider them too.

4. Membership Rewards

Most of the credit card suppliers run membership rewards programs too. Some of these are free to join whereas others might have a small fee associated with them. The ones with fee obviously offer more attractive rewards as compared to the free ones. So once you subscribe to a membership program (either explicitly or implicitly) you start earning reward points on whatever payments you make using your credit card. As you accumulate points, you become eligible for rewards which are based on the number of membership reward points you hold on your credit card. You can barter these points for attractive gifts. If you are a heavy user of your credit card, you will accumulate the points faster. Watches, bags, wine and a whole lot of good stuff can be bought using these reward points. So keep track of your reward points.

5. Cash back

Some credit card companies provide you with cash back option too where-in you might get a certain percentage of money back, if you spend more than a certain amount on your credit card. These are really good offers. Nothing can match a thing like cash back.

So, read all the benefits being offered on your credit card. You never know when one could become handy.

When credit cards represent debt, it does affect your credit score; but how? What do creditors think about too many credit cards? Does the balance on those credit cards imply more problems than just the debt it represents? All these questions are asked by consumers more and more often as each day thousands fall into increasing credit card debt.

The Exact Number of Credit Cards

There is not really an exact number of credit cards that you should be carrying with you. However, more than 10 credit cards are completely unnecessary. Moreover, you should slowly replace your credit cards for credit cards with higher amount limits but you shouldn’t keep the previous ones. And you should only do this if you can afford it and your debt to income ratio doesn’t suffer that much.

The idea is that the number of credit cards is not so important. What is really important is the amount of money you owe on them. Ten credit cards with the balance on zero all the time because you don’t finance your purchases and you use them just to avoid carrying cash, won’t alter your credit in a negative way and chances are that your credit history will benefit from such procedure. But accumulating high balances on your credit cards will definitely affect your credit score negatively and scare away new creditors.

Credit Card Balances and Credit Score

What is really important is to maintain your credit card balances within a reasonable range so income to debt ratio (and consequently your credit score) won’t suffer. A reasonable percentage would be anything less than 35% of the credit limit. However, anything ranging from 25% to 50% is acceptable as long as you can always meet the minimum monthly payments.

Any amount above that will make creditors raise their eyebrows when watching at your credit report. This is due to the fact that even if you always pay the minimum payments on your credit cards, too much debt accumulated makes lenders doubt your ability to repay further debt. That’s the main reason why a low income to debt ratio will lower your credit score even if there are no delinquencies on your credit report.

Thus, you should be very careful with the amount of credit cards you hold and always consider that having too many open lines of credit can scare away future lenders that you may need. Thus, if you don’t really use them, if you just have them because they where offered for free, you should close them.

But don’t close all your account at the same time because this will affect your credit too. Instead, slowly replace the credit cards you actually use with those with the lowest APR and the highest credit limit possible according to your needs, closing at the same time, those with the highest APR even if they offer exceptional credit limits.