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Loans |
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WHAT IS A LOAN?
A loan is money that you borrow and agree to pay back over a set
period of time with interest. The amount of money you borrow is
called principal, and interest is the cost for
borrowing the money. The length of time set to pay back the loan
is known as the term.
It is best to get a loan only for very large purchases or in an
emergency. Getting a large loan or getting many loans that you
can't pay back can cause huge financial problems, because it can
get very difficult to pay them back each month.
TYPES OF LOAN
Installment Loan
When you get an installment loan, you borrow all of the money at
once and repay it in set amounts, or installments, on a regular
schedule over a period of time.
Line of Credit
A personal line of credit is a type of revolving credit that
lets you write checks for the amount you want to borrow, up to a
limit set by the lender. The credit doesn't cost anything until
you write a check. Then you begin to pay interest on the amount
you borrowed. Whatever you repay becomes available for you to
borrow again.
BENEFITS OF LOAN
A loan gives you the money you need to pay for something big
like a house, a car, college tuition, or major home repairs when
you don't have the cash to cover the purchase. Most people could
not afford to do these things without loans.
COSTS OF LOAN
The cost of a loan is determined by the interest rate the lender
offers and the length of time you take to repay. In addition to
interest, a lender may charge other fees for the loan
application or to check your credit. These fees are often called
points.
Where to get a loan
Look for a bank or credit union that offers loans with low
interest rates and fees. Remember to look for a loan with the
lowest annual percentage rate. Banks and Community Development
Credit Unions are the safest and most affordable places to get
loans.
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