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[B818]Borrowing Money From Family

by Andrea Stiles Pullas, And

1. You don't have a credit history yet in the U.S.

2. You have had financial hardship in the past and your credit has suffered

If you dream of owning a home, buying a car, or starting your own business, it will be difficult and expensive to accomplish these goals without establishing and maintaining sound credit. Because this takes time and good financial practice, many Hispanics find immediate help from a loan shark.

What is a loan shark?

When you look for money, you may hear from people you know: "I know this person who loans money and doesn't even ask for papeles". This person who "loans money" could be a friend of a friend, someone who is friend of the family, or even could be found in a store in your neighborhood. There are many disadvantages to using the services of a loan shark even though many claim to be legitimate moneylenders.

They charge weekly interest rates – What is the real cost of loans from a loan shark? The lender will give you a weekly interest rate instead of an annual one. Remember that bank loans and other financial institutions always use annual interest. Let's take a look at a typical case: The lender gives you $1,000 and you agree to pay 5% weekly interest on this amount. 5% each week translates to about 20% each month, and if you multiply this by 12 months in year, you have an annual interest rate of 260%!

The payments are confusing – Weekly interest rates that don't seem that high may translate to up to 10, 20 and 30 times more interest than what you would pay in a traditional loan agreement.

The loans are hard to pay off– In fact, they are designed to be almost impossible to repay. Many people who have taken out loans from these lenders end up losing more than what they originally invested. If you are unable to pay, the lender may constantly harass you or even threaten you with violence. Many people who borrow money from loan sharks lose their businesses.

They don't report to credit bureaus – Loan sharks sometimes do not report their loans to credit bureaus. To establish, protect and maintain your credit history, you must make sure that your creditors do in fact report their loans to credit agencies. If they do not, there is no official record of your loan payments.

They don't operate within the regulations – If you have a complaint, you have nowhere to go because loan sharks do not have to abide by regulations put in place to protect you as the consumer.

In general, it is better to avoid these types of lenders at all costs. If you need money for your business or for an emergency and if you do not have access to a bank loan, try to take out loans with ACCION, a non-profit organization that gives business and personal loans and reports to the three main credit bureaus.

For more information, visit www.yourmoney.accion.org.

Many people do not realize how important the concept of borrowing money is to the economy. For most people borrowing money is just an easy way to get a new car or buy a house but for the country economy it is much more.
One of the things we keep hearing on the news is a percent number that symbolizes how fast the economy is growing. Economy growth is important to our lives. Although it sounds like yet another number professional economist use and confused us with in reality the economy growth is a good indicator to the health of the economy.
The health of the economy is important to us all. If the economy is doing well it means there are more jobs and there is more money for us to earn and of course to spend.
It is easier to understand the concept of economy growth and how it relates to borrowing money through an example of the job market. When the economy is growing there are also new jobs created and as employees in the job market we have more options to choose from that usually translate to better wages and benefits.
How are new jobs created? The answer is simple by creating new businesses. For example if a new factory opens in your city it will need to hire all kind of employees from factory floor workers to human resources and financial managers. When the economy is growing new business are created and in return they create more jobs.
How are new businesses created? Except for some rare cases all new business rely in one or another on borrowing money. Usually a group of entrepreneurs decide to start a new business for example a new computer manufacturing factory. They check the market evaluate the potential and write a business plan.
In order to build the factory they need a certain amount of money. The money is used to create the business and to run it to the point when it turns profitable. Most entrepreneurs do not have the cash to spend on such a new business. In turn they go to a bank or another borrower present their case the business plan and the idea and ask for money.
The bank makes a decision based on its evaluation of the new business risk. Usually the higher the risk the higher the interest rate that the bank would collect for the loan. At some point if the risk is too high the bank might decline the loan altogether.
If borrowing money is not available then new business are very hard to create since entrepreneurs do not have the cash to start them. If new businesses are not created the job market stays flat and the economy too. As you can see the concept of borrowing money is crucial for any economical growth. The ability to loan money allows for the creation of new businesses and for growth. Without money borrowing the economy will stay flat and eventually shrink.

Article Source : Pg. 292

About Author

Both Andrea Stiles Pullas & Jacob Georgeson are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Andrea Stiles Pullas has sinced written about articles on various topics from Finances, Apply for Grants. Andrea Stiles Pullas writes about small business loans and alternative credit for ACCION USA's .. Andrea Stiles Pullas's top article generates over 1300 views. to your Favourites.

Jacob Georgeson has sinced written about articles on various topics from Photography, Computers and The Internet and Photography. Mr. Georgeson writes about financial and Internet subjects. This article can be published and used as long as the resource box including the backlink is included. Jacob Georgeson is an amateur photographer and business guru. Find more on this subject on. Jacob Georgeson's top article generates over 2740000 views. to your Favourites.