The devil is always in the details, and nowhere is this more evident than when we look at the annoying fine print of credit card applications and loan agreements. The US government even made legislation against these evil little notes when they adopted the Law on Credit Law (TILA), where crediting entities disclose certain facts before they complete the transaction. Disclosure provides the information, but knowing what to do with that information is what helps you make wise financial decisions. Read on to discover the hidden costs, conditions and rules that could break your piggy bank.
Loan and credit card agreements
Loans agreements are full of pages with small print and mind-killing details. Five items to be searched for in a loan agreement include:
- Financing costs This number quantifies the costs of the credit. In addition to the amount (interest in dollars and cents) that you pay over the remaining term of your loan, the financial costs section also includes all associated costs necessary to receive the loan (such as document preparation fees).
- Annual percentage (APR) Annual percentage (APR) is the interest rate that you pay to a creditor annually. This number applies to all expenses, including interest on the loan, origination costs, discount points, etc. This is why a loan advertised with an interest rate of 8% often results in a loan payment based on a interest of 8.5%. rate. APR is the amount to be used when comparing loans from different potential lenders.
- Amount financed The amount financed is the actual dollar amount that you borrow. It is often less than the requested amount on your credit application because prepaid financing costs are deducted. Prepaid financing costs are paid when the loan is taken out. For example, if you borrow to borrow $ 50,000 and have to pay $ 2,000 in prepaid financing costs, the amount funded is actually $ 48,000. What does this mean Jules Maigretijk? It means that the lender has paid the $ 2,000 up front, rather than through the loan.
- Payment schedule The payment schedule shows you the number of payments, the amount required for each payment and when they are due. The schedule can also show the amount of principal, interest and insurance (if applicable) that is covered by each payment (such as for mortgages). In addition, the first few payments you make will be weighted primarily in the direction of interest, with only a small portion being spent on the principal. The last few payments you make are primarily weighted by principal.
- Total number of payments This is the total amount that you pay when you make all planned payments on your loan. In many cases, the total payments can be more than double the amount originally borrowed if no additional debts are repaid.
Credit cards Like loan issuers, credit card issuers must also disclose certain facts to borrowers. Most credit card applicants complain about the disclosures when they sign up for the card, but only realize – after it’s too late – how much the card costs them. Information that is worth mentioning when you apply for a new credit card is:
- Annual Percentage Rate (APR) In addition to the APR on the balance of borrowed amount, credit card issuers must also report the APR on balance, cash prepayments and defaults (all that are usually higher than the APR for purchases). Other common APRs are phased APRs, which charge higher interest rates above a certain amount; and iJules Maid retrain APRs, which are increased after a certain amount of time has elapsed. Both items must be carefully assessed. It is also important to know whether the APR is fixed or variable. If it is variable, you want to know how often it can change and how much.
- Grace period This is the time from the stated date on the statement that you have to pay your invoice in full if you want to avoid financial costs. Twenty five days is a fairly common timeframe, but some cards offer less time. Your balance on time and full payment per month is the best way to avoid financial costs.
- Calculation method for purchases Credit card companies use different methods for calculating balances. Some base their figures on the average daily balance, others on the previous balance of the account. Calculations can be made over one billing cycle or over two billing cycles. New purchases can be included or excluded from the calculations. Calculations based on a single billing cycle and the average daily balance generally lead to lower financing costs.
Minimum financing costs This refers to the financing costs that must be paid if your financing costs are lower than the specified amount. For example, if your financial costs amount to $ 0.75 this month and the minimum financing costs for your card are $ 2, then you have to pay $ 2. If you pay your full balance every month, the minimum financing cost will not be charged.
- Annual fee If the credit card issuer charges you an annual fee for using the card, you must know the amount of the fee and whether it is charged monthly or annually.
- Other costs This category contains transaction costs for balance transfers, cash advances and for cases where you have exceeded your spending limit. Return check fees, payment arrears and other various costs also fall under this category.
Conclusion Loans and loans are common components of modern life. They are tools that can be used to help you achieve your goals or to help you dig a financial well that could make bankruptcy the only escape. If you understand how these tools work, you will learn how to use them properly. Reading the instructions is a great place to start your education.