Edited to add: SQUEEEE!!! I’m Blog of the Day at PayPerPost! That is AWESOME, thank you!!! I feel like *sniff* Miss America *sniff*.

I used to work in the loan department of a credit union. My first position was as the file clerk, so I spent a lot of time looking at loan documents. It was my job to make sure that when someone applied for any kind of loan, the appropriate documents were on file. If you’ve never borrowed money, here are some tips to get you started.

There are two basic types of loans. The first type is the Secured Loan. When you borrow money to buy a car, boat, RV, or house, the object itself is the collateral on the loan, meaning that if you don’t repay the loan, the lender can take back the collateral. A used car loan is a typical first loan for people just starting out on their own, and it’s fairly easy to get as long as you have a secure income.

The second type of loan is the Unsecured Loan, also known as a personal loan. People apply for personal loans for all kinds of reasons, including to pay for vacations or Christmas presents, to purchase furniture or to finance home improvements. The interest rates on personal loans can be quite a bit higher than on secured loans, so you want to shop around and make sure you know the terms of the loan.

I don’t think there’s anything wrong with taking out loans as long as the monthly payment is truly affordable. Sit down and make a list of all of your monthly expenses, and then add in the amount of the monthly loan payment. Do you still have money left over for food and gas and a little savings just in case? It’s important to live within your means, and I know that saving money can be hard when everything is so expensive these days. But you don’t want to lose your property because you couldn’t really afford the monthly payments, either.

Another thing to think about is building your credit history. As ironic as it might seem, NOT borrowing money does not give you better credit than if you DO borrow money. Creditors want to see that you are able to make your payments on time. A small secured or unsecured loan that you pay off on time, in full, can be a good way to get your credit history started. And nothing feels better than making that last payment and getting your loan documents back stamped “Paid in Full”!

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