Welcome to Amjambo Africa’s series on Borrowing. 

In the U.S., people borrow money from all kinds of lenders, such as credit card companies, financial institutions, and individuals. They borrow for all kinds of reasons, from buying presents for their children to celebrate a holiday, to purchasing a new home. Because almost all loans must be repaid with interest, learning when to borrow, who to borrow from, what questions to ask of a lender, and when not to borrow will help you make good decisions and protect your financial future. In a country where loans are readily available, borrowing can be hard to resist. But if you are not careful, you could end up with too many monthly payments and too much debt for you to be able to manage. The consequences of not paying back loans on time could be a bad credit score, higher interest rates in the future, or being unable to get a loan just when you need it most. Follow our series on borrowing, and get some tips from the experts on how to borrow wisely. 

Borrowing: Part 4

When Aurelia was ready to purchase her first car, she asked her parents how to choose a vehicle, negotiate a deal, and take out a loan. Her parents had experience in all of these areas and shared what they had learned. She was surprised that what they emphasized most was the car loan she planned to apply for. They explained that by taking out a loan, she would be beginning to build a credit history, and that this credit history would impact her financially the rest of her life. Aurelia’s father Edgar shared a mistake he had made in the past, hoping his daughter would avoid making the same mistake.

When Edgar took out his first car loan, he did not realize that loan payment deadlines are firm, and the payments must be made on time. At one point, he traveled out of the country for several months. While he was away, he didn’t make any payments. Edgar’s credit union made several attempts to contact him about his late payments, but he ignored them. He didn’t realize that his credit score was declining while he was neglecting his payments, and that his credit union was calling to see if there was something they could do to help. When he returned, he was afraid the lender was angry, or that he was in trouble, and did not call his credit union.  

Later in life, whenever he wanted to buy another car, apply for a job, or get a house mortgage, he faced serious obstacles because he had poor credit. He eventually paid off the original car loan, but the late payment history that had caused the lower credit score in the first place continued to concern lenders. They were reluctant to allow Edgar to borrow money again. Edgar knew he needed help, and was happy when his banker offered her expertise. Working with his credit union, Edgar was able to rebuild his credit. However, it took time, patience, and discipline. 

Aurelia’s parents hoped she would learn from Edgar’s experience that each on-time payment is a brick in the foundation of a credit profile and good credit score, and that this profile and score help prove to lenders she is reliable and will pay them back. Also, they explained that good credit would help her obtain better interest rates on loans, saving her thousands of dollars over her lifetime. So Aurelia let her parents show her how to set up autopay for her loan, to make sure she would never be late.

As Aurelia’s financial journey continued, she saw for herself that having good credit helped her get good interest rates. Landlords were more willing to rent to her, knowing she had a solid credit history. And when it came time for her to buy a home, her excellent credit score enabled her to secure a lower interest rate than many people she knew. 

Not everyone has parents like Auriela’s, who are familiar with the U.S. credit system and are able to help. But everyone can learn from Auriela’s story, and reach out to their credit union or bank for help building credit.

Understanding credit in the U.S. is essential to navigating personal finances and establishing independence. Credit is issued by credit unions, banks, and other lenders, and allows someone to borrow money to access goods or services that they either cannot, or do not wish to, pay for at the present time. Credit is issued with the agreement that the borrower will pay it back later. 

Repaying loans on time is key to being able to borrow again in the future, so all payments to the lender – even minimum balance payments – should be made by the due date. Late and/or missed payments can severely impact an individual’s overall credit score and impact their ability to obtain more credit for future needs from lenders. This could mean that getting loans for necessities such as a car purchase, college, or a home may become very difficult, very expensive, and even impossible. 

Lenders want to be sure the borrower can and will pay them back entirely and on time, so a good credit score and history is important. Lenders look at a person’s payment history before agreeing to give a loan. With a long credit history and a strong credit score, one missed payment is not usually not a big problem, but most newcomers do not have a long credit history in the U.S., which can make obtaining a loan much more challenging. Furthermore, without a long credit history, one late or missed payment looms large and could destroy the confidence of the lender. 

Late, missed, and delinquent payments remain on someone’s credit report for seven years. The result can be reduced credit limits, late fees, and increased interest rates – all of which can become a financial burden. Ensuring that payments are made by their due date improves one’s credit score and paves the way for people to thrive in the U.S. system.

If a person has a past due payment on their credit report, they should try to pay it off as quickly as possible. The longer it stays unpaid, or delinquent, the worse it looks on their credit report and the more negative the impact. Generally, outstanding balances will be moved to a debt collection agency, or “collections,” after 30 days for loans, and 180 days for a credit card account.

Accounts in collections are noted on credit reports, and this brings down a person’s overall credit score. Once a payment account has been moved to collections, it cannot be moved back under the “current” section of a credit report. At this point, the original lender may take legal action against the delinquent user and sue them to recover funds lost.

The use of an automatic bill payment feature, or “autopay,” takes away the possibility of forgetting or missing a due date. Many people find this a great way to meet payment deadlines.

Reminders of payment due dates help people pay back loans on time, for example on a calendar or by setting up reminders on a phone.

Some people like to make payments early when possible. Then, if they run into unforeseen financial struggles or have a family emergency that requires travel, they have some time before the next deadline.

Financial institutions have staff to support anyone looking for guidance regarding their financial situation – including understanding, navigating, and improving credit and overall creditworthiness.

Amjambo Africa’s next series on financial literacy will be an in-depth look at the U.S. credit system.

A service that automatically deducts funds from a checking or savings account to make a recurring payment, such as a bank loan.

The ability of a customer to obtain goods or services before payment, based on the promise that payment will be made in the future.

Credit history
A record of a borrower’s current financial obligations and past repayment of debts, including whether they were paid on time or not.

Collection agency
A company that works closely with lenders to retrieve delinquent funds.

Delinquent payment
A payment that is not paid in full by the due date.

Interest rate
The amount of money that a lender charges a person to borrow money. This is a percentage of the loan amount, and is paid back as part of the monthly payment every month

Borrowing: Part 3

A healthy credit score is essential for a positive financial future in the U.S. since potential lenders get information from credit bureaus about how much risk someone is likely to be if granted a loan. But sometimes people find themselves in trouble, with a car that needs repairs, or a medical emergency, or a lost job, and they are worried about preserving their credit. What should they do, especially if they are already in debt? 

Try not to be afraid or embarrassed to ask your loan officer for help. They are trained professionals and it is in their best interest to help you find solutions to repay your loan. So be honest and realistic about your situation, and enable them to help you. There are many different ways your lender can help. For example, some loans allow you to skip one or two payments and pay them later. Or a lender might be able to help you create a new payment plan that’s more manageable. Or loans can be refinanced, or combined, which could result in a lower payment or interest rate overall, making them more affordable. The important thing is to talk to your lender as soon as possible. 

Make a list of all your income and necessary expenses in a month. If your income isn’t enough to cover the costs of all your bills, adjust your spending so that you are only buying what you really need. Reducing expenses is the quickest way to free up money to pay back a loan. Find ways to bring in extra income. This might mean taking a second job or selling personal items. There are consignment stores and online marketplaces where items can be sold. When reviewing your budget, look at the frequency of when the loan payment is due. Sometimes a lender will work with you to adjust the payment date to align more closely with when you receive your paycheck. It might help to pay weekly or biweekly in smaller amounts, rather than month to month. Another tip is to have a separate account just for your loan payment funds. Doing this ensures you won’t accidentally spend the money on something else. 

Sometimes when people owe money, they seek an additional loan to quickly remedy the situation. However, if paying the first loan has been challenging, and the underlying reasons you are having trouble paying the loan are not addressed, an additional loan could eventually lead to a bigger financial problem. This additional payment could make the loan even more challenging to pay down. If you have no choice but to take out an additional loan, do research so you are confident that you are working with a legitimate company. Understand the terms, fees, and impact on your credit the new loan will have. Borrowing money from friends or family may be tempting because they are willing to help. However, be realistic about how you will pay them back. Not being able to make your payments to friends or family members could have a harmful impact on your relationship in the future. 

Most people need to communicate with a creditor at some point in their lives, whether they are looking to finance a purchase, request an increase to credit limits, adjust repayment dates, or even seek temporary relief or alternative arrangements. Whenever dealing with a credit card company, student loan provider, financial institution, landlord, utility company, or any other creditor, open, honest, and clear communication can help quite a bit. Here are some tips on how to communicate effectively with creditors. 

Before you reach out to a creditor, try to have a clear understanding of your financial situation. You should have already attempted to balance your  monthly budget – analyzing income, expenses, and outstanding debts. Doing so can help you identify the challenges you are facing. Having a full understanding of your entire financial situation – beyond just the situation with a specific creditor – can help when it comes to determining a solution. For example, if you know how much income you can count on each month and how much you will need to set aside for monthly living expenses, knowing what you can realistically pay to a creditor each month will be easier. If the amount you can pay each month is less than you owe, it’s important to be honest with the creditor. Honesty and transparency are key to determining a realistic solution that will work for both parties. 

If you anticipate financial difficulties and don’t think you can make your full payment to a creditor on time, don’t wait until you miss a payment to talk with the creditor. Creditors may be willing to work with individuals who are proactive about addressing financial issues. There may even be special programs, such as hardship plans, for qualifying individuals that will help keep their accounts in good standing. Waiting until you are behind on payments can lead to fees, increased interest rates, and damage to your credit score. 

Creditors will often have many communication channels, such as phone, email, social media, online portals, and more. It’s important to choose the appropriate channel when communicating to creditors. For example, if you want  to discuss a billing error, calling the creditor or sending an email would probably be more effective than messaging on social media. You should also document the date, time, and name of the person you speak to, as well as make notes about decisions you and the creditor reach together. This will be helpful in the event of inaccuracies or if the changes aren’t implemented. Many calls to creditors are recorded, so having this information will help them locate the recording and review it for accuracy, if solutions aren’t implemented as planned. 

Instead of just stating your problem to a creditor, you should present potential solutions. These could be a revised repayment plan, a temporary reduction in interest rates, an inquiry about hardship programs, or a suggested new payment due date. Creditors appreciate borrowers with a proactive approach to resolving their financial issues. They can discuss the proposed solutions and the creditor may have other suggestions, too. 

If you find it difficult to effectively communicate with creditors, or if your financial situation is particularly difficult to navigate, consider seeking professional guidance. Many Maine credit unions have Certified Credit Union Financial Counselors available in-branch or over the phone to assist people in overcoming financial problems. Alternatively, people can seek debt management agencies or even legal advice to help them through difficult situations. 

At the end of the day, in today’s complex and fast-paced world, managing one’s finances is hard. Being able to effectively communicate with creditors can prevent a bad situation from becoming even worse, or even prevent financial struggles from happening at all. 


Creditor – An individual or institution to whom money is owed. 

Credit limit – The maximum amount an individual is allowed to spend on a line of credit (borrowing). 

Hardship plan / Hardship program – A plan negotiated via one’s credit issuer, which may temporarily lower interest rates, waive fees, or even pause payments for a period of time for eligible borrowers. 

Borrowing: Part 2

Marielle’s son really wanted a special bike for his birthday, but it was expensive. However, she was determined to make her son’s fifth birthday extra memorable, and she had a steady job, so she carefully assessed her overall budget and realized she could afford the bike if she spread the payments over time. With a clear idea of how much money she needed, she considered two options: using her credit card or applying for a personal loan at her local bank or credit union. 

She liked using her credit card because it was so convenient, and she had developed the habit of paying off her credit card balance each month. She also enjoyed the added benefit of a rewards program. She knew she could purchase the bike for her son immediately using the card. But it would be a big purchase, so she decided to also explore the option of a personal loan, in case she could save on the final cost. 

When Marielle did her research, she noticed a difference in the interest rates offered by her financial institution and those offered by her credit card company. Using an online calculator to determine the exact difference, she discovered – to her surprise – that the interest rate on a personal loan from her financial institution would be significantly less expensive than payments on her credit card over time.  

Next she considered repayment options and fees. She discovered that personal loans offer fixed payment terms. That meant that if she decided to take out a personal loan, she would know exactly how much she had to pay back each month. With a personal loan, she could plan her spending, which was reassuring because she had people depending on her, like her mother back in Rwanda, and her son. Also, she had heard of people in the community who had gotten in over their heads financially and owed a lot of money. Because her credit card did not have a fixed payment plan, planning would be more challenging. If she decided to use her card to purchase the bike, she’d have to be really careful not to spend too much each month. She also discovered that her credit card had hidden fees, but the personal loans didn’t. The credit card company charged for late payments – even payments that were only one day late – and had an annual fee.   

Marielle decided she had done enough research. She went to her financial institution during her lunch break and asked for an interpreter, just to be sure there were no misunderstandings. And then she arranged to take out a personal loan.  

Credit is the ability to borrow money to access goods or services, with the understanding that the borrower will pay the money back later. Credit unions, banks, and other lenders issue credit to people who want to obtain something, but either can’t or don’t want to pay for it at the moment. Before someone is granted credit – or allowed to borrow money – lenders determine the borrower’s creditworthiness, or how likely they are to pay the money back in full and on time. Creditworthiness is represented by a credit score, which is a number between 300 and 850. The higher the score, the better one’s creditworthiness. 

Credit is the ability to borrow money to access goods or services, with the understanding that the borrower will pay the money back later. Credit unions, banks, and other lenders issue credit to people who want to obtain something, but either can’t or don’t want to pay for it at the moment. Before someone is granted credit – or allowed to borrow money – lenders determine the borrower’s creditworthiness, or how likely they are to pay the money back in full and on time. Creditworthiness is represented by a credit score, which is a number between 300 and 850. The higher the score, the better one’s creditworthiness. 

When someone has a poor credit score, they may have trouble obtaining a loan, or they may be faced with a higher interest rate if they are granted a loan. In other words, they might need to pay a larger charge for the privilege of borrowing money. 

If someone does not have a good credit score, in order to be approved for a loan from a financial institution or receive a favorable interest rate, a borrower could seek out a co-signer. 

A co-signer is a person who agrees to share responsibility for a loan with a borrower – often because the primary borrower wouldn’t qualify for a loan on their own, or because they only qualified for a high interest rate loan. Essentially, a co-signer is someone who promises to repay the debt if the primary borrower fails to do so. The co-signer is legally responsible for repayment, however they have no rights to the money or to any other assets funded by the loan. 


Helping someone in need. Usually, the benefit for a co-signer is helping someone they care about. Co-signing can help younger borrowers get a start in life, help new arrivals get their feet on the ground, or help someone re-establish their credit after going through a difficult time. Co-signing can make it possible for someone to purchase their first home, get a vehicle so they can drive to work, or even refinance existing debt at a more affordable rate. 

Possible increase of credit score. If the primary borrower is making their payments in full and on time, co-signing can positively impact their credit score. Or the loan can improve the co-signer’s credit mix, which can also lead to higher credit scores. 


Possible decrease of credit score. If the primary borrower misses payments or is late with them, this can negatively impact the co-signer’s credit score. The co-signer should be in regular contact with the primary borrower to make sure they have a plan for payments to be made on time. 

Strained relationship. If the co-signer needs to take over the loan payments because the primary borrower is unable to fulfill their legal obligation, or because their credit is negatively impacted by missed or late payments, their personal relationship with the primary borrower can become strained. Even if payments are being made, having to monitor one’s own financial obligations, along with someone else’s, can become exhausting and stressful. 

Limited control. A co-signer typically has no control over the account. They may not receive statements or updates on the loan’s status and must rely on the borrower sharing this information. 

At the end of the day, a co-signer can help friends and loved ones secure credit they wouldn’t be able to get on their own. However, the co-signer takes on equal financial liability with the primary borrower. Therefore, considering all of the pros and cons before signing anything is essential. 

Borrowing: Part 1

Whether it’s for a new car, home renovation, or starting your own business, finding the right lender and loan is crucial. It’s essential to ask the right questions when meeting with potential lenders. In this article, we’ll review some key questions you should ask a lender when you need to borrow money.

Whether it’s for a new car, home renovation, or starting your own business, finding the right lender and loan is crucial. It’s essential to ask the right questions when meeting with potential lenders. In this article, we’ll review some key questions you should ask a lender when you need to borrow money.

Choosing the right loan for your budget depends on how comfortably you can meet the repayment terms without putting undue stress on your financial health. Each loan type – personal loan, home loan, car loan, or business loan – has its own terms and conditions, interest rates, and repayment schedules.

The best loan for you is one that aligns with your financial goals and has a competitive interest rate, manageable repayment terms, and minimum fees. For example, if you have a steady income and are looking to buy a house, a fixed-rate home loan could be a good choice as it provides stability with the same monthly repayments.

On the other hand, if you are starting a small business and need flexible repayment options, a business line of credit might be more suitable. Always ask about all costs associated with the loan and calculate the total amount payable over the length of the loan to understand whether a particular loan fits your budget.

The interest rate is one of the most crucial factors when taking out a loan. The interest rate is the percentage of the principal amount you will be charged for borrowing the money. A higher interest rate means your monthly payment will be higher and you will end up paying more, in total, over the life of the loan.

Ask your lender what their current interest rates are and if they offer fixed or variable rates. Fixed rates stay the same throughout the loan, while variable rates can fluctuate with market changes. It’s also important to ask if you can lock in an interest rate, as this can protect you from potential rate increases.

For many types of loans, your credit score can also have a strong impact on the interest rate of your loan. Higher (better) credit scores qualify for the best interest rates, and lenders usually increase the rate for average or lower scores. Making payments on time and practicing other good credit-building habits save money in the short and long term when borrowing funds.

Aside from the interest rate, there may be additional fees associated with your loan. These can include application fees, origination fees, and prepayment penalties. Before committing to a loan, ask your lender about all the fees involved and if there are any potential penalties for paying off the loan early.

To get a better understanding of the true cost of your loan, it’s essential to ask your lender for an estimate of the total amount you will be paying back. This includes not only the principal amount borrowed but also interest and any fees or penalties.

Understanding the repayment terms of a loan ensures that you can comfortably afford the payments. Ask your lender about the length of the loan and if there are any options for refinancing or extending the term, if needed. A longer term loan may have a lower monthly payment, but it’s important to note that the interest rate may be higher, and the total interest paid over the life of the loan will be higher as well.

It’s also important to ask about payment frequency – monthly, bi-weekly, or weekly – and if there are any penalties for late payments. Knowing these details can help you make an informed decision and set up a payment that works best for your monthly budget.

Lenders often have specific credit requirements for borrowers to qualify for a loan. These requirements can include a minimum credit score, debt-to-income ratio, or payment history. Ask your lender what their specific credit requirements are and how those will impact your particular loan scenario.

Always ask the lender how applying for a loan may influence your credit score. Many inquiries or new loans that are quickly taken on can negatively affect your credit score. On the positive side, if you make your loan payments on time and in full, this can improve your credit score over time.

However, it’s important to know that applying for a loan can sometimes lower your credit score. When a lender checks your credit (known as a “hard inquiry”), it can cause a slight, temporary dip in your score. Also, if you fail to make your loan payments on time or default on the loan, it can significantly damage your credit score.

Finally, it’s essential to ask your lender about the process and timeline for loan approval. This can vary depending on the type of loan and lender, so it’s helpful to have a clear understanding of what to expect.

Ask about required documents, potential delays in the approval process, and estimated timelines for receiving funds if your loan is approved. This can help you plan and manage your expectations for the loan process.

With the correct information and preparation, you can get a loan that fits your budget and helps you achieve your financial goals. So don’t hesitate to ask these critical questions when meeting with a lender. The answers will help you find the right loan for you. A great lender will provide clear answers to any questions you may have, provide options to find the right fit for your unique scenario, and be a strong financial partner to help you achieve your goals. Remember to compare offers from more than one lender to find the best deal.