Skip to main content

Sponsored Content

Personal Loans 101

Jan 25, 2016 03:37AM ● Published by Family Features

If you happen to find yourself in a tight spot, borrowing money can help set you back on the right path. However, doing so without a full understanding of the facts can hinder your finances in the future.

“When faced with a financial emergency, most people don’t think through how borrowing money might affect them down the line,” said Susie Irvine, president and CEO, American Financial Services Association Education Foundation. “With so many options available, it’s relatively easy to get a loan, but the impact on your credit and what it actually costs you over time can vary a great deal.”

The two most common types of small-dollar borrowing are traditional installment loans and payday loans. Knowing the ins and outs of each type of loan and how they work can help you make the best decision for your financial situation.

Traditional installment loans are one of the oldest forms of finance transactions and provide credit to individuals and families who need access to credit to meet an immediate need, such as vehicle repairs, household appliances or medical expenses. Averaging around $1,500, traditional installment loans are “plain vanilla” loans with transparent, easy-to-understand repayment terms, due dates and payment amounts – which usually average $120 per month over a term of about 15 months. With regular, manageable payments of principal and interest, the borrower has a clear roadmap out of debt. Best of all, traditional installment lenders report payment activity to credit bureaus, improving a borrower’s credit score when payments are made on time.

Payday loans are repaid in a single balloon payment at the end of the loan period. This payment is usually due in less than 30 days and frequently the term is as short as 14 days. Payday lenders do not assess ability to repay, relying instead on a postdated check or similar access to a borrower’s bank account as assurance the loan will be repaid. If a borrower cannot afford to repay a payday loan in full when it comes due, they are left with no option but to refinance the entire balance of the initial loan. Although payday loans may appear to provide a quick and easy solution, this single, lump-sum payment can lead to significant problems for the borrower. Payday lenders have also been sanctioned in many states, and at the federal level, for abusive practices.

Is an Installment Loan Right for You?
When deciding whether to obtain a loan, consider the benefits and responsibilities. According to the American Financial Services Association Education Foundation, an installment loan:

  • Obligates future income. You’ll be required to set aside a certain amount of future income for loan payments.
  • Requires discipline. Borrowing wisely means not borrowing more than you can handle. Don’t let the thrill of buying obligate you to more than you can afford.
  • Makes it possible to meet unexpected expenses. The ability to borrow and make affordable payments can be helpful if an emergency arises that requires extra money.
  • Allows you to obtain products and services now and pay for them later. A loan can provide an opportunity to purchase bigger-ticket items and use them right away.

Loan Language
When you take out a loan, it’s important to understand the complete cost of repaying the amount you’ve borrowed. It’s a good idea to compare offers from multiple creditors and understanding these terms will help you calculate the real cost of borrowing to get the best deal. Here is a list of common loan terms from the American Financial Services Association Education Foundation:

  • Amount Financed: The total dollar amount of the credit that is provided to you.
  • Annual Percentage Rate or “APR”: A measure of the cost of credit expressed as a yearly rate.
  • Credit Insurance: Optional insurance that is designed to repay the debt if the borrower dies or becomes disabled.
  • Finance Charge: The dollar amount you pay to use credit.
  • Fixed Rate Financing: The interest rate and the payment remains the same over the life of the loan. Equal monthly payments of principal and interest are made until the debt is paid in full.
  • Length of Payment: The total number of months you have to pay the credit obligation.
  • Late Payment Fee: A fee that is charged when payment is made after its due date.
  • Monthly Payment Amount: The dollar amount due each month to repay the credit agreement

Keys to Credit Success
The American Financial Services Association Education Foundation offers this advice to help ensure that your interests are protected when you borrow money:

Budget your money. Provide your monthly spending plan when you meet with creditors. It will help them make a responsible decision about the amount of credit you can afford.

Don’t overextend. Be sure you can pay back the loan. Don’t bite off more than you can chew.

Get personal. If possible, borrow from someone you actually can see and talk to in person. Get comfortable with the lender, and let the lender get comfortable with you.

Shop. Compare costs. Shop for credit like you would shop for anything else.

Beware of “now or never” offers. If it’s a good deal, it will probably still be there after you’ve had time to think about it. Don’t be pressured into making a quick decision.

Ask questions. Don’t sign on the line until all your questions have been answered.

Read the contract. Don’t sign a contract that you don’t understand or has any blanks. A signed contract with blanks can be completed as anyone wishes and it will be legally binding.

Keep your contract in a safe place. It’s important to keep all paperwork relating to your credit obligations. If questions come up later, you’ll have your agreement in writing.
Make your payments on time and in full. This is one of the best ways to build a good credit history.

Additional products are not required to get a consumer loan. Optional products that may be offered for purchase with your loan include motor club membership, term insurance or warranties.

To learn more about affordable credit options that are available to help you better manage your money, visit installmentloanswork.com.

Photo courtesy of Getty Images (couple with laptop and paperwork)

Sponsored by AFSA

Like what you're reading? Subscribe to Cabarrus Magazine's free newsletter to catch every headline

Family Features Family Features Lifestyle
  • A VET TOGETHER

    10/17/2017
    09:00AM — 11:00AM

    • Join Cabarrus Veterans Coalition the first Tuesday of each month at Carm’s for free coffee and ...


  • SC 25 Fastest Growing Companies

    10/17/2017
    11:30AM — 02:00PM

    South Carolina's Fastest Growing Companies competition is the Annual ranking of the Palmetto Stat...


  • SC 25 Fastest Growing Companies

    10/17/2017
    11:30AM — 02:00PM

    South Carolina's Fastest Growing Companies competition is the Annual ranking of the Palmetto Stat...


  • Thriller Dance Lessons

    10/17/2017
    06:00PM — 07:00PM

    Ever wanted to learn the King of Pop’s famous Thriller dance? Now’s your chance! Head over to the...


  • COOKSMART/EATSMART COOKING SCHOOL

    10/17/2017
    06:00PM — 08:30PM

    Thursday evenings, October 12,19,26 and November 2 * 6-8:30 p.m. * $50 NC Cooperative Extensi...


  • TODDLER STORY TIME

    10/19/2017
    10:30AM

    • Children from walking age to three years old with caregiver. Songs, stories, finger plays follo...


  • View Trailer, More Info & Register on our Event Page. This 43-minute film goes behind the fi...


  • COOKSMART/EATSMART COOKING SCHOOL

    10/19/2017
    06:00PM — 08:30PM

    Thursday evenings, October 12,19,26 and November 2 * 6-8:30 p.m. * $50 NC Cooperative Extensi...


  • Music on Means

    10/19/2017
    06:00PM — 09:00PM

    To hear it, you might think you just stepped into Motown. To breathe it, you smell a tropical bre...


  • Cook Smart/Eat Smart

    10/19/2017
    06:00PM — 08:30PM

    This popular hands-on cooking class teaches more than 24 cooking techniques to make meal planning...


  • Brush Lettering 101

    10/19/2017
    06:30PM — 08:30PM

    Join Leah Benfield, with Little Dot Artworks, and Hive for a Brush Lettering Workshop. We will go...


  • View Trailer, More Info & Register on our Event Page. This 43-minute film goes behind the fi...


  • Music on Means

    10/19/2017
    06:00PM — 09:00PM

    To hear it, you might think you just stepped into Motown. To breathe it, you smell a tropical bre...


  • Brush Lettering 101

    10/19/2017
    06:30PM — 08:30PM

    Join Leah Benfield, with Little Dot Artworks, and Hive for a Brush Lettering Workshop. We will go...


  • 5th Bi-Annual Harrisburg ARTwalk!

    10/21/2017
    11:00AM — 07:00PM

    New Artists - Food & Entertainment! This year The 5th Annual Harrisburg ARTWalk continues it's gr...


  • Fall Festival & Movie in the Park

    10/21/2017
    03:00PM — 09:00PM

    Fall Festival begins at 3 p.m. Movie (Monsters Inc.) begins at 6:30 p.m. Come dressed in your...


  • 10th Rotary Annual Seafood Festival

    10/21/2017
    05:00PM — 08:00PM

    Cabarrus Rotary Charitable Works presents the 10th Rotary Annual Seafood Festival to raise funds ...


  • Movie Night Double Feature

    10/21/2017
    07:00PM — 09:00PM

    Join us for movie night on the farm featuring “Curious George: A Halloween Boofest” and “Curious ...


  • Just say "no" to electronics and hand held devices and step back in time to see the marvels of ea...


  • Thriller Dance Lessons

    10/24/2017
    06:00PM — 07:00PM

    Ever wanted to learn the King of Pop’s famous Thriller dance? Now’s your chance! Head over to the...


  • Trick or Treat in the Park

    10/27/2017
    05:30PM — 09:00PM

    Games * Candy * Food * Inflatables * Costume Contests * and More! Hundreds of costumed trick o...


  • Thriller Masquerade Ball

    10/27/2017
    08:00PM — 11:00PM

    This event celebrates the fun tradition of the carnival season. Attendees are invited to dress up...


  • Pumpkins in the Patch & Candy in the Corn

    10/28/2017
    10:00AM — 06:00PM

    Come out dressed in your Halloween costumes or attire. Trick or treat around the farm. This event...


  • Already the Carolinas' largest costume party, the Carolina Renaissance Festival becomes the place...


  • Come out to our third annual Kaleidoscope Cultural Arts Festival and Candy Crawl! We will have ar...


  • Halloween Fun Fest

    10/28/2017
    03:00PM — 06:00PM

    Our annual Halloween Fun Fest in Downtown Salisbury will bring ghoulish fun to residents and visi...


  • Gold Hill Ghost Tour

    10/28/2017
    05:00PM — 08:00PM

    Enjoy a fun night of ghost stories at one of the most haunted sites in Rowan County. Ghost storie...


  • Pumpkins in the Patch & Candy in the Corn

    10/29/2017
    10:00AM — 06:00PM

    Come out dressed in your Halloween costumes or attire. Trick or treat around the farm. This event...


  • Already the Carolinas' largest costume party, the Carolina Renaissance Festival becomes the place...


  • Candy Crawl

    10/31/2017
    03:00PM — 05:00PM

    Local merchants provide trick-or-treating and family-friendly entertainment on Union Street in Do...


  • Sweet Street at the Park

    10/31/2017
    05:00PM — 08:00PM

    Sweet Street is a family-friendly trunk or treat festival. There will be food, games, activities,...


  • Fall Plant Sale

    11/02/2017
    09:00AM — 05:00PM

    Garden now for spring blooms! Plants will be available for pick up between 9am and 5pm on Nove...


  • Cook Smart/Eat Smart

    11/02/2017
    06:00PM — 08:30PM

    This popular hands-on cooking class teaches more than 24 cooking techniques to make meal planning...


  • World of Outlaws World Finals

    11/03/2017
    06:00PM — 11:00PM

    The most prestigious dirt racing event in the country, the Nov. 2-4 World of Outlaws World Finals...


  • Battle for the Bell

    11/03/2017
    07:30PM

    Come watch the battle starting at 7:30. There will be tailgating beforehand, so be sure to stop b...


  • Hops & Heat Beer and Chili Festival

    11/04/2017
    01:00PM — 05:00PM

    Join us for an afternoon of Beer, Bands, and Buckets of Chili in Downtown Concord! Live music ...


  • Hops & Heat Beer and Chili Festival

    11/04/2017
    01:00PM — 05:00PM

    Make the best chili in town? Prove it! Join us Saturday November 4th from 1 - 5:00 p.m. in Downto...


  • Fall Back 5K

    11/05/2017
    01:50AM

    The inaugural Fall Back 5K is a new and exciting run event in the City of Kannapolis which starts...


Get Cabarrus Magazine Delivered to Your Door!

Subscribe today!

Proudly Brought To You By These Community Sponsors