The headlines have been full of the banking giant Citigroup and their financial problems. Crying to the government to give them a helping hand at the tax payers expense.

Doesn’t is seem strange that a multi-billion dollar financial company which loans people and business money everyday from financing homes, credit cards, business and everything in between must now essentially go back to the people (their customers) they loan money too and ask for help.

Loan Lessons to Learn

We can learn from all of this money mess on a personal level, break down Citigroup’s problems and apply the principles to our own lives.

One for the things Citigroup did was make horrible lending choices. They went against “best lending practices” and loaned money to people who probably should have not received any loan. True, the borrower did have to ask for the loan and they are at fault also. However, the borrowers did not have the cash reserves, steady income or give enough of a down payment to handle a money storm. Or these same people got a credit card with limits and spending habits out of check with no financial discipline… just like the company that gave them the loan.

Don’t be like Citigroup and make bad lending (borrowing) decisions. Understand the limits, start learning to manage money the same way in good times or bad. Why should handling money be different?

What is your cash reserve now? Do you have an emergency fund? Have you borrowed way beyond your means to repay? Freeze the spending and begin to pay things down.

Citigroup made bad choices and it is costing them dearly. Will your choices cost you? You unfortunately do not have the luxury of heading to D.C. and picking up and check for your bad decisions.

When applying for a credit card, you must understand the importance of the APR. The Annual Percentage Rate affects how much you pay in interest on your credit card. With millions of Americans are currently in debt, you should understand how credit cards work to avoid falling into the same trap.

Using credit cards can become very expensive, especially if you have a high APR. Be sure you understand the interest rate and all of the fees associated with using your credit card. If you don’t, these fees can really add up, making it hard for you to pay the bill each month.

If you have bad credit, you will probably only qualify for a card with a high APR, as well as additional annual fees. If you do sign up for such an offer, pay the bill on time every month, and then in six months contact the lender and ask for a lower interest rate.

One way to do this successfully is to research other credit card companies willing to offer you lower interest rates, and threaten to leave if your current credit card company does not lower their rate. However, if do not often pay on time or have only recently gotten the card, this strategy will not work.

Before applying for a credit card, make sure you do your research so that you know how interest rates work and what would be a reasonable APR for you to accept. Also look at the Terms & Conditions to learn about fees for balance transfers, overdrafts, cash advances, and other activity on your account. Consider how often you would be charged these fees to find a card that works well for your situation.

Again, if you already have a credit card, then make all of your payments on time to increase the likelihood of getting a better interest rate in the future. If your credit card company will not lower your interest rate, consider switching to a different credit card company willing to offer you a better rate. Make sure to take care of the remaining balance on your current card before leaving, or you could be charged a penalty fee.

Keep in mind that credit card interest can add up quickly from month to month. If you don’t pay your balance in full each month, having a credit card can get expensive. Ask yourself if it is worth it, and try your hardest to lower the interest rates. Make sure you understand exactly how much your credit card is costing you each month, and weigh the benefits against the risks.

If you feel that you can do without a credit card, that is a viable option to consider. In fact, many people do not use a credit card. Make sure you read all of the details if you do decide to sign up for a card. If you don’t understand the card’s fees, you could find yourself in debt because of the credit card.

Just because your credit isn’t the best doesn’t mean you can’t get a personal or signature loan from a bank or institution. However, having an excellent credit rating makes it much easier and with lower interest. But, these types of loans are now available and can be a great way to build your credit rating and manage your finances effectively.

Obviously, there is a price for having less than perfect credit and in this case, it’s higher interest rates. They aren’t always unreasonable, however, so shop around and see what is available first. It should go without saying that the worse off your credit is, the less likely you’re going to find a good interest rate. So be reasonable in your expectations and demands.

Secured personal loans, backed by property or collateral, are also good choices. It also gives you incentive to make sure your payments are on time, every time. Creditors know this and will be more likely to give a loan under these circumstances. Your car, home, or other property are all viable sources of credit for you.

Each time you successfully use and pay off credit, your credit account will go up and you’ll have a better and better score. That all-important score is what secures your ability to get better and bigger loans, easier terms, and better interest rates. So keep building that credit score up.

Utilize the tools you have and make sure your credit is being used well. Wisely paying your loans on time or early and making sure your terms are acceptable so that this can happen is the key to success in building or renewing credit.