Tip #92: Use loan calculators to estimate your finances and keep your credit rating in good shape

Online loan calculators are a useful tool that can help you determine how much of an interest rate you should pay, how much in monthly payments you can afford, and how much your loan will cost you in interest over the long term. 

Online loan calculators are free to use and can help you figure out how to make your debts more affordable.  There are online loan calculators for auto loans, home loans, and personal loans.  If you are going to be getting a new loan, these calculators can be a powerful resource.

Tip #93: Avoid payday loans

Payday loans are also called “cash advance loans” and they are small and short-term loans that carry very high interest rate.  Some companies have even begun to advertise them as loans to help you repair your credit, but this is very misleading. Some companies suggest that these loans can help you pay off your bills and so establish good credit, but if you cannot afford to pay your payday loans on time, you have to “roll-over” or extend the loan - often at huge expense and interest.  Many people get into a payday loans cycle, whereby much of their monthly paycheck goes towards paying off their ever-growing payday loans.

In fact, several states are investigating payday loans for possible illegal activity stemming from usury laws.  If you cannot afford your bills one month, you are much better off trying to arrange an alternate schedule of payment with the companies you owe money to rather than risking your credit rating through payday loans.  Payday loans may be fine in a true emergency, but the payday loans cycle gets very unaffordable very fast and can ruin your credit rating.

Tip #94: Do not use one debt to repay another

This results in accumulating interest and so increasingly unpayable bills.  If you use one credit card to pay off another, for example, you are paying interest on interest, and paying off the new credit card bill will be more difficult.

This method will also mean that you will always be looking for new credit and new debt to pay off your increasing debts.  It makes more sense to get a second job or arrange for a new payment schedule.

Paying off your debts with another debt may help you in the short run - you will not have a late payment on your credit record - but in the long run the larger debt load will make maintaining good credit more and more difficult.  The only exception to this rule is debt consolidation, in which all your bills are paid by one lender, who then becomes the only creditor you owe money to.