Taking Loans and Investments

Your Corporate Black Girl

Dear Nikki,

I am just wondering if you guys have any advice on taking loans and investments or the best way to look for them?

Toronto, Canada

Dear Future Investor,

Like all things, each of these options has positives and negatives. The key to making the right decision for you is to be informed.

Loans are like a death trap... loans are like credit cards, where you borrow money to pay for something later but at an added cost to you than the "sticker price".

The advantage is the immediate access to cash right now. I wouldn't spend more than what you're able to pay back on a monthly basis. Loans typically have higher interest rates, so be mindful of reading all stipulations before committing. With my experience with taking out loans, you end up paying more into the interest on the loan and it feels like forever before the loan gets paid off.

The thing to remember about loans is, you'll get a set amount of cash immediately and will start to accrue interest on that same money at the same time, unless you ask for a deferral payment plan. Loans, in general are costly, but like we'll discuss with credit cards, have no penalties for paying the balances off early.

If your goal is to build credit, then getting a credit card is the best option. Introductory APRs are usually low but will jump up to much higher rates after a certain timeframe. Read the fine print before signing up. You'll need to establish credit in order to get more credit. Credit allows you many benefits, like getting the best interest rate when purchasing something like a car or a home. Interest is the amount of money you pay back the bank or creditor (credit card company) in order to have access to the money right now.

There's rules to this!

  • Only use what you need. Start off small and use a credit card for gas or groceries. Pay off the balance when you get your statement for the month.

  • Pay off the balances right away, if you can or as soon as you can.

  • Pay more than the monthly minimum payment.

  • Interest is accrued DAILY on any balance held (outside of the intro APR period).

  • There are no penalties for paying off debt early.

  • You MUST pay on time each month.

The key side notes to remember:

  • If you're not able to pay off your entire balance each month, keep your total balance owed less than 50% (half) of the allowable credit limit they're giving you. This will tell the credit bureaus that you can manage the debt you have and is favorable when looking to accumulate more debt.

  • Open lines of credit are OK to have on your credit report. It's the % of balance to limit and your payment history that creditors look at when determining your next interest rates.

I think the main thing I learned about having credit cards is that once you get out of an active habit of trying to pay off the balance, you end up getting more credit cards! So, use them wisely and have a plan to pay it/them off.

Investments are risky, in that you may lose some of what you've put in but you're also able to make much more of a return on that same money than you would holding the funds in a bank account. If you're wanting to "let your money work for you", then opening an investment account is the best thing going! The odds are in your favor, if you know what you're doing OR you can easily get a financial advisor or open an account that is managed by an advisor who can trade on your behalf in a discretionary account. Since interest rates are all over the place right now, but dropping, you'll want to put your money into the stock market so you can earn more interest than at the bank.

If you're serious about your financial future, I would highly suggest getting a financial advisor.

Good luck!

Nikki Davis

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Your curly girl manager, just trying to live her happiest life! 

Wife, new mom, member of Delta Sigma Theta Sorority, Inc. with 11 years industry experience, 6 years of management experience. Manager a team of men in a male dominant industry, while being the only woman on the team. DIY fashion blogger, a self taught seamstress. Owner/Creator of a monthly subscription service, SewConscious.com

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