It’s a common theme in today’s sluggish economy. Individuals or businesses have needs that require financing, but the traditional channels of financing have changed drastically over the past several months. The same banker that greets you by name and has been able to meet your credit needs in the past may have bad news for you the next time you walk into your bank branch. The difficulty in obtaining credit is causing consumers to look at borrowing options that they haven’t had to consider in the past.

There are several areas that borrowers should be careful to consider when obtaining financing right now:

-   Interest Rates: Many potential borrowers are finding that some financing is available to them, but the interest rates attached to those borrowed dollars are substantially higher than they would have been in the past. This may be acceptable if the money is needed for short term projects and can be repaid within a few months, but interest costs of borrowing long term money can make a huge difference in whether or not a particular loan is a good fit. With credit cards, keep an eye on your monthly bills to make sure that your issuer has not raised your interest rates-many companies are now charging cardholders maximum rates to make up for borrowers who have defaulted on their payments.

-  Fees: There are fees associated with many lending programs and credit cards that can make using those options a bad idea. In addition to typical annual fees, there can be fees for accessing cash from a line of credit, fees for going over borrowing limits, and fees for making late payments. Even if you are borrowing at an attractive rate, these fees can increase the costs of borrowing without the borrower even realizing it.

Number of Lenders: Because some borrowers are having trouble getting the financing they need from one source, they may approach several sources for smaller loans to come up with the cash they need. Remember that your credit profile is accessible to future creditors, who may hesitate to lend to you in the future if you have multiple credit lines open with various lenders. Put yourself in the position of a bank or a lender-if someone with your exact financial profile approached you for a loan, would you consider them a qualified borrower? Every decision you make will impact future loans and interest rates, so keep your credit report as clean as possible!

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Tags: credit, fees, financing, interest rates, money

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