Credit. Credit. What is it? – the ability of a customer to buy goods or services before paying for them, based on an agreement to pay later. Always investigate the terms of credit before using it. What to investigate 1. finance charge – total amount paid to use credit.
1. finance charge – total amount paid to use credit.
2. Annual Percentage Rate – cost of credit as an annual % of the principal borrowed.
1. character – personal qualities – honesty
2. capacity – ability to pay debts – income v.
3. Capital – what you own that can be used to back up a loan – known as collateral.
New borrowers may need a co-signer.
payment comes off of interest first. May take forever to pay off principal.
Credit card companies must now tell you how long it will take to pay off the principal.