Anne-Marie Saint-John, Alva, Long Island City, NY >

The Cost of Credit

It is important to understand the costs of different forms of credit. Some forms of credit may be easier to obtain than others, but there will always be associated costs.

Hand holding multiple credit cards and debit cards for online shopping

If you are thinking about applying for a loan or opening a credit account, your first step should be to calculate how much it will cost. You should then see whether or not you will be able to pay for it and look for the best options. When applying for the credit, there are three main terms you need to be familiar with:

  1. Capital: The amount of money you are borrowing.
  2. Interest Rate: What the lender charges you for allowing you to use your money. It is a percentage of the capital (charged per year, month, or week).
  3. Associated Costs: Among these costs is what the lender must spend to review your credit application or to service your account (maintenance costs, charges for services rendered, charges for errors).

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