The potential of bi-weekly payments

Bi-weekly payments are the simplest and most effective method for borrowers to save thousands of dollars in interest.

More payments (26 vs.12) cause the principal to be reduced faster than normal.
Each year contains 12 months, but 26 two-week pay periods.

Since interest is charged on the remaining principal, extra money diminishes what's owing, slashing the total interest cost.

How to build your credit history

Credit ratings refer to your credit record or credit history. Whenever you borrow money through a financial institution, credit card, store, employer or educational institution, you are making a entry into your credit record. Every time you submit an application for credit, the business making the loan purchases a copy of your credit record. In Canada, there are two main credit-reporting bureaus: Equifax Canada and TransUnion of Canada.

Your credit history is detailed information. It is a biography of your life that was written by your capital. It includes your date of birth, your social insurance number, your employers, and your marital status. Anything in the public record, including bankruptcies, foreclosures, liens, judgments, secured loans and even financial counseling, can be included in your credit record. It also lists every debt you possess, including the balances on your credit cards. Beyond that, it even tells how often you have been late with payments and precisely how late you have been.

Establishing and maintaining a good credit rating is extremely important. With cash transactions gradually becoming the way of the past, a positive credit rating is crucial when purchasing major, and sometimes minor, goods.

A credit score is a number reflecting the weight given to many of the variables within your credit history. Certain financial institutions may use their own scoring system; other lenders use the commercial scores obtained through Equifax and TransUnion.

The score is used to predict the probability of a borrower repaying the loan or failing to be able to payback. Lenders base their decisions on the character of the borrower, the security offered, the ability to repay, the amount borrowed and the purpose of the loan. Most lenders once used that formula, but now most banks simply enter your data into a computer and receive in return a single number. If your number falls higher than the pre-determined figure, you are approved for the loan. Below that number, you are turned down.

In order to develop a good credit score, follow these steps:

• Obtain copies of your credit rating and credit score from Equifax and TransUnion. Both are needed because each company may have different information. If the information on either credit history is wrong, correct it immediately.
• Pay your bills on time. Even if a company allows a grace period try to avoid it. Paying late still lowers your credit score.
• Own between two and four credit cards. Fewer cards shorten your credit history; more cards indicate that you are financially exhausted.
• Try to keep your debt-to-income ratio under 20 percent.
• Make irregular requests for further credit.
• Make payments more than your minimum payment. Not only do large credit card balances hurt your score; the interest rate on credit cards is inflated.

Credit is a part of life. Make sure your credit rating and credit score are in good standing.

Buying versus leasing a car

For most of us, purchasing a car comes down to finding the best deal for what we can afford. But recently, leasing has become a popular option to buying outright.

But what does leasing involve and should you consider it opposed to buying?

• Leasing is a method of possessing a car without actually owning it. Consumers pay for two years of depreciation plus monthly interest. When the lease period ends, one has the option of purchasing the vehicle or returning it to the dealer.

Buyer beware

• Automobile dealerships advertise leases featuring minimal monthly payments and low or no down payments. Make sure you do your homework. Never take the word of the salesman and make sure to go over the documents carefully looking for clauses or hidden charges.

Advantages of leasing

• Low monthly payments, little or no down payment
• The dealership usually covers major repairs.
• Consumers can drive a more expensive car than they could afford to buy
• Tax laws permit the expenses of a leased car used for business purposes to be tax deductible

Disadvantages of leasing

• Leasing accumulates no equity.
• Leasing can often be more costly than buying on credit.

Almost all dealers have different terms in their lease. Take the time to review them and you’ll surely make the right decision.