Teenagers of today are realizing that it pays to start thinking about their financial future sooner rather than later. Many have great ideas they would like to develop into a money-making business. While it's possible for teenagers to start their own business, it's a little more difficult for them to find the means.

There are ways to get a business loan as a teenager, but young entrepreneurs might have to jump through a few hoops first. It's important to realize that by law, teenagers who are under the age of 18 are not old enough to take out a small loan. To obtain a loan, an individual must be considered a legal adult. The reason? If you sign a loan application as a minor, the loan company would be unable to enforce the contract if you defaulted and did not pay. Basically, as long as you are a minor, your signature is worthless!

But, this does not mean that teenagers cannot get a business loan. The teenager's parents or guardians could loan the money, and an informal agreement could be worked up. The parents/guardians of the teen could give the money to the teenager, who in return would promise to pay the elders back each month.

If the teenager's parents/guardians do not have cash on hand, they could get a small business loan in their names, and then pass the money over to the teen to launch the business. The same, informal agreement would need to be mocked up to ensure the teen understood the importance of giving the parents/guardians a payment each month.

As a teenager, borrowing from your family or friends is really the best bet if he or she is still of minor age. However, once the teen reaches the age of 18, there are additional options. If the teenager is aged 18 or over, there is a possibility that the young adult could be given a small business loan.

When thinking about obtaining a small business loan, it's beneficial to know what the lender looks at to determine eligibility. The lender looks at a loan request in three parts, which are nicknamed "The Three C's." They include: credit history, capacity, and collateral.

An individual's credit history details if he or she pays bills on time and includes a credit score. A person's capacity tells if that individual can afford to pay back the loan, which is determined by a paycheck and the amount of debt that is listed in a credit report. A person's collateral establishes what assets he or she has for the lender to take in the case the debt is not repaid.

Obviously, having a strong "Three C's" score is difficult for many adults, let alone a teenager that does not have much credit, capacity or collateral. So, securing a loan might be a tough job for a teen.

There are numerous lenders out there who have loose criteria for loans, and would work with a young borrower. While some lenders and private organizations are willing to grant business loans to those people, including teens, who don't have a lot of credit, it usually comes at a steep price: The lower "Three C's" score a person has, the higher the interest rate will be. Also, low scores also result in having increased down payments.

If a teenager does not have a high enough "Three C's" score to obtain a loan, he or she can always ask a responsible adult to co-sign. This would mean that the teenager's name would be on the loan, but an additional signer would also be listed. Co-signers promise to pay the debt if the original signer fails to do so.

In the end, a teenager can access a business loan, but it might be hard work! But, if a teen is persistent and is dedicated to the business idea, it just might be the start of something great.

Posted by Stuart in Loans at 6:49 AM | Permalink | Comments (0)

Debit cards have come a really long way from their original incarnations; where in the past, they primarily served as a means to withdraw funds from a bank account, today they can be used at point of sales transactions at many stores and online retailers. The addition of a Visa, Mastercard or other credit card logo to the face of a debit card can expand its usefulness exponentially, allowing it to be used anywhere such cards are accepted. However, some people are confused about the difference between credit cards and debit cards, as the two have become somewhat intermingled and the line between them has become more and more blurry.

The Basics Of Debit Cards

Essentially, debit cards are linked to a checking or savings account and are used much like a check would be. Most debit cards are used in combination with a PIN (personal identification number) that increases their security features and helps prevent unauthorized use. Since debit cards are linked and provide access to a person's personal bank accounts, they must be kept in a safe place and their PIN must be kept a closely guarded secret. In terms of appearance, debit cards closely resemble credit cards but do not always have a series of numbers or expiration dates printed on their faces.

Many people strictly use their debit cards for the purpose of withdrawing funds from a bank account. The term "debit card" is basically interchangeable with the term "ATM card" - which means "automated teller machine card." When people refer to using an ATM card, they usually mean a debit card, and vise versa. These cards are accepted not only at the bank's ATMs, but also at the ATMs of other, unassociated banks; when used at ATMs outside of their own network, though, debit cards can incur usage fees.

In addition to being used for withdrawing money from a bank account, debit cards are accepted at many grocery stores and other retailers upon checkout. Once all of the items have been scanned and a total has been given, a person can use their debit card - in combination with their chosen PIN - to pay for their purchase. This option has dramatically decreased the use of personal checks in such situations. Retailers generally prefer debit cards over personal checks as much less processing is involved from an accounting standpoint.

The Basics Of Credit Cards - And Credit Card/Debit Cards

Unlike debit cards, credit cards are not normally linked to a personal checking or savings account. Instead, they serve as a way to gain access to a line of credit extended by a credit card company. When a person uses a credit card to pay for their purchase, they are accruing debt that must be paid off at a later date; this debt also accrues interest charges and may be subject to other processing fees. By not being careful, a person can accumulate a great deal of debt very quickly by using credit cards; when the statement arrives in the mail, many people realize how reckless they have been.

Credit cards are often used in lieu of debit cards when debit cards are not accepted. Most online retailers do not provide a means of using debit cards and PINs, so people who find themselves shopping online often have to use a traditional credit card. However, one of the most popular exceptions to this problem are debit cards with credit card logos and numbers imprinted on them. These cards allow a person to use the funds from their personal checking or savings accounts to pay for purchase anywhere that credit cards are accepted.

Although a debit card may have a credit card logo, numbers and an expiration date on it, it does not cause additional debt to accrue. These products have further decreased the popularity of paper checks, and fewer and fewer people are using those items these days. Instead, the convenience of credit cards and debit cards rolled into one is rapidly becoming the preferred method of payment for millions of people.

Posted by Stuart in Credit Cards , Savings at 7:53 AM | Permalink | Comments (0)

Opening your first bank account can seem like an overwhelming, intimidating task. Bank accounts imply responsibility -- both financial and personal -- and for many people, opening a bank account is a big step into a new, adult life. And while opening a bank account is an important event in anyone's life, it doesn't invite any new, substantial commitments into a person's life. Instead, opening a first bank account allows a person to start thinking about their finances more analytically, giving them the freedom to save, the power to spend, and a keen understanding of where, exactly, they stand financially.

Step 1: Choosing a Bank

Choosing a bank may be the most important part of the process. Most large cities host a number of reputable, nationwide chain banks as well as local banks and credit unions. It's up to you to decide what's important in the choice of a personal bank. National presence? If you travel frequently, you'll want a bank with ATM machines and local branches across the country. A close relationships with a personal banker? Many regional banks are able to offer a sense of "home" at their banks, with personal bankers knowing their clients by name. Special, promotional products aimed specific professions? Many credit unions offer very competitive interest rates and products -- such as home remodeling loans -- that can't be beat by larger chains.

Decide what you expect and demand from your bank. For many people, the safety of a large, national bank brand is the most important factor -- they know that their money is safe. But if you're after attractive interest rates, the largest bank chains generally cannot compete with regional firms, who many times offer very useful features on their accounts -- such as refunding ATM fees from other banks and waiving international currency conversion fees.

It's also important to consider what kind of account or accounts you'll be opening. If it's strictly a checking account, your needs will differ from someone looking to open both a savings and checking account. You might also decide to open a credit card account from a bank, but that type of account comes with its own set of concerns and responsibilities and will not be discussed in this article.

Go into several bank branches and take brochures describing the various accounts they offer. Create a list of each bank's account features and compare their advantages and disadvantages. This way, you'll be able to visually contrast each bank's feature set against your own expectations and needs. You should be able to decide which bank matches your own financial ambitions.

Step 2: Opening Your Account

Once you've selected a bank and an account type, you're ready to open your first bank account. Drive to the nearest branch of the bank you've selected and sign up to speak with a personal banker. During busy periods -- such as lunch during the week or directly after work -- you may have to wait up to an hour to speak with a personal banker. But many times, the branch where you've opened your account is associated with your account, so you'll want to open your account at the most conveniently-located branch as opposed to a branch with lower foot traffic.

There is some information that you may need to take with you to your meeting with the personal banker. A cell phone or utility bill with your current address, a pay stub from your current job, and a some sort of deposit (such as a check or cash) may be required before you can open an account. Keep this in mind.

Tell the personal banker the type of account you'd like to open. You may be required to present the information listed above, so have this ready. This part of the process is generally very straightforward -- the personal banker will input your information into his computer and should be able to get your application finished in a matter of minutes.

You'll probably be given a temporary ATM card when you open your account, but a fully-functional debit card won't come for a few days. Activating your debit card is generally as simple as checking your balance from an ATM.

Conclusion

Once you've opened your first bank account, you'll have much more control over your personal finances and much more freedom to deposit, withdrawal, and save money. Opening your first bank account is the first step to financial freedom.

Posted by Stuart in Banks & Financial Institutions at 6:47 AM | Permalink | Comments (0)