Unsecured loans and credit card borrowing can be expensive. Credit card interest rates are steep. Many cards offer low introductory rates for the first six months, but raise the rate thereafter. Even many of the so-called low interest credit cards charge double-digit interest rates at a time when your bank offers only 3 percent on your savings account. Many cards charge as much as 21 percent, especially merchant credit cards. Many charge an additional annual fee, plus service charges for cash advances.

Paying off credit cards can take years. Most people don't realize just how much the interest compounds over time. For example, even if you make the minimum monthly payments on a balance of $1,000 with an interest rate of 18 percent, you could be making payments for almost 10 years.

Credit card companies often grant more credit than the consumer is able repay. Although interest rates are high, credit cards remain attractive to many borrowers because of their low required minimum monthly payment. Borrowers thus feel secure charging large amounts because they can make at least the minimum payment.

Unsecured loans, such as payday loans, can also be very costly. Payday loans are deferred-deposit loans, whereby a lender will accept your post-dated check in exchange for cash on the spot. Fees can be very steep, often as high as 10 percent of the amount of the check. A $500 check could cost $50! Many people find themselves living paycheck to paycheck on these types of loans, and falling deeper and deeper in debt. Yes, they can be very convenient when used for emergencies and sparingly. Just don't fall into a trap.

So, never charge or borrow more than you reasonably believe you can pay off within three to four months. Pay off balances as soon as possible, even if you have to use your savings to do so. Your savings earn only about 3 percent in a savings account. Your credit cards may charge as much as 21 percent interest. If you use your savings to pay off your credit cards, you net an 18 percent gain. So, borrow wisely and strive to be debt free when you retire.

About the Author: Chris Robbins is the founder of http://www.directlendingsolutions.com your source for bad credit loans and mortgage information.