At some point, you probably need to borrow money to make major purchases or pursue personal goals. Buying your first car or starting your own business will likely require obtaining a loan from a financial institution or other lender .
A loan is a financial agreement between you and a lender , such as a bank. Both agree to the terms and conditions, stating that they will return the money borrowed within a specified period. In exchange for this service, the lender charges interest , usually expressed as an “annual percentage rate” (APR). For example, if you have a $ 3,000 loan with an interest rate of 10%, throughout the year, you will pay $ 300.
BANORT MOTORCYCLE INSURANCE: WHY IS THE INTEREST INCLUDED?
Lenders take a degree of risk in case you cannot pay them.
- Types of credit
- Not all types of credit are the same: Credit cards, lines of credit, and term loans have different uses and different terms and conditions . Some credit products have an interest rate
- variable, which means that the interest rate you pay will vary with the cost of credit. Other products
- Loans have an interest rate that is fixed for the life of the loan.
BANORT MOTORCYCLE INSURANCE: CREDIT CARDS
A credit card works in much the same way as other types of loans: you take out a loan to make a purchase and agree to repay the loan , including interest. Unlike other loan products, the additional features make credit cards a very useful payment tool:
THEY ARE QUICK AND EASY TO USE, AND WIDELY ACCEPTED
- They are not hard to come by, especially if you already have a good credit history.
- Often – not always – there is a grace period before you have to pay interest .
- Credit cards have associated costs that you should be aware of. You can pay an annual fee for the use of the card. Also, you pay interest if you don’t pay the full balance you owe each month.
Each month, your bill will show the minimum that you must pay – but be careful, if you only pay the minimum payment, you will be carrying a balance and paying interest for a long time . It is best to pay the full balance on your credit card each month, within the grace period, to avoid paying interest. If this is difficult for you, it may be a sign that you need to re-evaluate your monthly expenses.
IT’S THE CASH ADVANCE
Another feature of credit cards is the cash advance. This is a loan, and the grace period does not apply as in purchases, so you have to pay interest on it from the day you take it out . Fees can add up, so cash advances should only be used for emergencies.
Like other financial products, different cards have different features and different fees . Find the one that offers you the services you need at the best price. Interest rates can vary substantially depending on the type of card you have.