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If you’re reading this, you probably have at least one credit card already. Credit cards can be a helpful tool when used appropriately, including helping you establish credit and build your credit score. However, you can also damage your credit score if you develop bad habits with your credit cards. Here are some tips to help you avoid going down the wrong path so you can better manage your finances. You can also check out our Credit Card Tips sheet for additional information.

Looking for a New Credit Card?

If you’re in the market for a credit card, there are some important factors to keep in mind. First, do you already have a credit card? If so, why do you need an additional card? Typically, one is all you really need. If you open several new accounts within a short period of time, your credit score could be damaged. You could be perceived as a higher credit risk because you increased your capacity to take on more debt. This might ultimately be hard to repay.

If you’re looking for your first credit card, be sure to compare different offers and find the card that will work best for you. Here are some things to look for in a credit card:

  • Find a card with the lowest interest rate
  • Avoid outrageous fees (make sure you read all the fine print to understand what fees can be charged)
  • Be cautious of low introductory interest rates that can increase greatly after their initial low interest period

Managing Your Existing Credit Cards

Once you have a credit card, it’s best to have a solid game plan in advance. Sticking to your strategy ensures you won’t get in trouble financially and find yourself with an impossibly high balance.

Credit Card Goals

Here are four goals that will help you stay in control of your credit cards:

  1. Try to pay your balance in full each month. Think of your credit card as an extension of your bank account. That way, you won’t be tempted to charge more than you can afford. Just remember not to charge more than you could pay if you had used your debit card.
  2. If you can’t pay your balance in full, try not to carry much of a balance from month to month. Make a goal to pay more than the minimum monthly payment due. This will help you pay down your balance as quickly as possible. Keep in mind the balance you are carrying is also charged interest, which can make that original purchase more expensive.
  3. Don’t be late with any of your payments. Make sure you know your monthly payment due date. Even if you plan to pay the balance in full, it’s important to make that payment on time. You may want to set a reminder for yourself so you won’t miss that date. If you’re late by even one day, your credit card company may charge a higher interest rate and late fees. Additionally, being late on a payment may lower your credit score.
  4. Avoid impulse purchases and cash advances. Just because you have a credit card doesn’t mean you’re obligated to use it. Although it may be tempting to buy something expensive on credit, it’s better to take your time and save for that purchase. Remember that using your credit card to buy something expensive this month means paying for it over several months. And, you’ll end up paying a lot more than that original purchase price with the added interest charges. Finally, don’t use your credit card for cash advances at the ATM. You could be charged a fee, and may also pay a higher rate of interest on that transaction.

Use Credit Responsibly

Remember, credit cards can be a helpful financial tool when used responsibly. Do you currently have a balance with a high interest rate? Are you looking for a smart way to pay off that debt? A personal loan is a solution worth exploring to pay off your high rate credit card balances. You can find more information about personal loan solutions, as well as additional tools and resources at U-fi.com.

Does your January credit card statement have you feeling blue? Find out how personal loans could provide credit relief.

It Happens to the Best of Us

The holidays have come and gone. You may be feeling a bit relieved that all the seasonal hustle and bustle is over. Sure, it may be a bit cold outside. Sure, work is back in full swing. But, things are looking good with your New Year’s resolutions. You’re feeling optimistic and energized.

Then, you receive your January credit card bill. Whoa, the new balance is much higher than you expected. As you go down the list of purchases on your statement you ask yourself, “Did I really spend that much?” You also notice the available credit on your credit card is pretty low. There are some big purchases coming up in your future. You were planning on using your credit card to pay for them. Now, you no longer have enough available credit to pay for everything as planned.

With average credit card APRs over 16%, and many exceeding 20%, you know if you don’t pay your balance in full you’ll be hit with a hefty finance charge, which will be added to your outstanding credit card balance. And even worse, if you’re late making the minimum payment that’s due, you could be hit with a penalty APR, which can be as high as 29.99%.

Personal Loans Could Provide Credit Relief

This is where personal loans could provide credit relief. Unlike a credit card, which is a revolving line of credit, a personal loan is an unsecured loan that doesn’t require any collateral, such as a car or house. Personal loans come with a specific repayment period, usually between 1 and 7 years. Fixed interest rates are more common than variable interest rates, and some lenders will offer you a choice.

The main reason people take out personal loans is to pay off existing debt, such as high interest rate credit cards or loans. Other common reasons include making major purchases, for home improvement projects, for special occasions like weddings, to take a vacation, and to pay off medical bills.

Personal loans can range from as little as $1,000 to as high as $100,000. APRs vary widely among lenders and are based on the borrower’s (or co-signer’s) credit history, annual income, repayment term selected, and type of interest rate chosen. Some personal loans even come with money saving automatic payment discounts and loyalty discounts.

Tip: Some lenders charge upfront fees, which add to the total cost of the loan, so be sure to take that into account before choosing a lender.

A really nice feature for personal loans is how quick and easy the process can be. If you submit a completed loan application, you can receive a decision in a matter of minutes, and if approved, receive funds in your bank account as soon as the next business day, provided your application has no typos or errors.

Now that the holidays are over, you may be suffering from the post-holiday credit card blues. If so, check out a personal loan for credit relief from U-fi’s partner. It just may be what the doctor ordered.

If you have received your financial aid award and still need money for college, private loans may be worth considering. Banks, credit unions, and other lending organizations offer private loans.

First Steps for Private Loans

You take out private loans in your own name. They often require you to apply with a qualified cosigner who has an established credit history. Even if you don’t need a cosigner, using one may still help you obtain a better interest rate. Lenders provide the best rates to borrowers and cosigners with the strongest credit qualifications.

As a general rule, private loans should be the last financial aid option. Always file the Free Application for Federal Student Aid (FAFSA) first, and accept any grants, scholarships, work-study and federal loans offered by your school before taking out a private loan. Federal loans offer more repayment options, income-based programs, and in some cases, loan forgiveness alternatives.

If you decide a private loan is right for you, consider these things when selecting a program.

1. Check to see if your college has a recommended lender list.

Some schools investigate private loan programs and providers on behalf of their students. They provide lists of those they think would best meet their students’ needs. If your school has a list, you can begin there. Your school generally posts school lender lists on their financial aid website. In many cases, the website links you to a third party where your school provided a list of programs. In either case, loan programs are usually listed by feature, so you can compare to see which might best meet your needs. If your school does not have a lender list, you can investigate Credible or other websites which will provide loan program options and help you compare features.

2. Decide which features are the most important to you.

  • Rates – In comparing interest rates, you will see some lenders use an index called London Interbank Offered Rates (LIBOR), and others use the Prime Rate index. Since they aren’t the same, look at the loan programs’ Annual Percentage Rates (APRs). The lowest and highest APR ranges are be displayed. If APRs aren’t listed, be aware that the Prime Rate is typically two to three points higher than LIBOR. The most current rates can be located in the Federal Reserve’s Statistical Release.
  • Fees – Most private loan lenders offer zero application and origination fees. Check all loan programs you are considering to make sure this is true and to determine if there are other fees associated with the loan.
  • Repayment plans and terms – Would you prefer in-school interest payments to keep your costs down? Perhaps multiple repayment period choices like a 5, 10, or a 15 year period are best for you. With private loans, you choose your repayment period at the time you take out your loan. You may also want to check to see if there are deferment or forbearance options if you run into difficulty in repayment.
  • Cosigner release – Your cosigner is responsible for making payments if you do not. The cosigner’s credit report reflects any late or missed payments as well. When investigating options, determine if the program offers a cosigner release, how many payments you will need to make before that is possible, and how involved the release process is.
  • Borrower benefits – Lenders offer a variety of benefits like interest discounts for auto-debit payments, cash back for achieving certain grades, or interest reductions after a specific number of on-time payments. Be sure you determine which are the most important to you and take the required action to meet the requirements.

3. Understand the difference between fixed and variable rates.

As you compare differences between programs, interest rates may be a primary factor. You will need to decide between fixed rates, which may be higher at first but remain the same throughout the life of your loan, or variable rates which may be lower at first but change periodically based on fluctuations in the economy. For more information about the factors to consider before making this decision, go to U-fi’s frequently asked questions.

4. Your rate is the one that matters most.

Lenders may advertise low rates when they share their program’s interest ranges, and many students assume they will receive the lowest rates. See if lenders allow you to use a calculator. If you can enter general information about you and your cosigner, you may be able to obtain a preview of what your interest rate will be before completing the application process and providing authorization for your credit to be pulled.

Private loans can provide a solid financial option for students who need help bridging the gap between financial aid and college costs. Be sure to first research programs fully and understand your responsibilities before taking out any type of education loan. If you have questions, your college financial aid office is the best source of information and guidance about your individual situation.

You’ve probably heard the term cosigner. But, do you know what it means, how it can help you, or what qualities make a good one? If you find your federal funds aren’t enough to cover the cost of college, consider applying for private student loans. Applying with a cosigner can help you qualify for a private student loan. It can be difficult for student borrowers to meet the criteria and income requirements by themselves. Learn if a cosigner is right for you.

What is a cosigner?

A cosigner is a person who signs for a loan with a borrower. If the borrower misses payments or defaults on the loan, the cosigner takes responsibility for payments and the remaining balance. Since both the borrower and cosigner have equal obligations, missed payments and default affect both their credit.

How does having a cosigner help me?

Including a cosigner on a loan decreases the risk for the lender. That’s because the lender has another person obligated to repay the loan if the borrower defaults. Cosigners allow the lender to take on less risk. Less risk increases the borrower’s chances of getting approved for the loan. It may also lead to better loan terms. These include lower interest rate or shorter repayment length. Both could save considerable money over the life of the loan.

Even if you qualify for a loan without a cosigner, the loan terms are generally not as favorable. However, wanting a cosigner to improve your loan terms and needing one for approval are two different circumstances. You may need a cosigner if you have no income or too little income, have no established credit or poor credit, your debt-to-income ratio is too high, or if you are either unemployed or recently changed jobs and don’t have an employment history. If any of these scenarios apply to you, you should consider applying with a cosigner to qualify for the loan. Applying with a cosigner gives you time to fix any of the above issues. It can also mean you can take out future loans on your own.

Who should I ask to cosign?

The most difficult part of choosing a cosigner is finding someone who is willing to sign on a loan with you and also has strong credit. Typically borrowers will turn to spouses, parents, or close friends to cosign. No matter who you choose, be sure your cosigner is financially stable. Other traits to look for in a credit-worthy cosigner include having a good job with a solid employment history and/or owning a home or other assets.

Asking someone to cosign on a loan with you is a big commitment, so make sure you are prepared. Tell your potential cosigner the reason you are asking them to cosign, your intentions to pay the loan back, and communicate to them that you can afford the payments. You can also ask your lender if there is a cosigner release option. Some loans will allow you to request that your cosigner be removed from the loan after a period of time if you meet certain requirements. Being prepared to answer any questions your potential cosigner has will show that you are serious about taking on the financial responsibilities of a loan.

Cosigning is a big commitment for both the borrower and the cosigner and should not be taken lightly. Make sure both you and your cosigner understand all terms and are clear on the responsibilities of the loan prior to signing.