What is a finance charge?
A finance charge is a cost that the borrower has to pay for taking out a loan or obtaining credit. This charge can include interest, points, broker fees and other charges associated with the loan or credit. Finance charges are generally calculated based on the amount of money that is borrowed and the terms of repayment.
They can vary depending on the type of finance product used but are typically expressed as an annual percentage rate (APR). It’s important to understand finance charges when seeking any form of a credit to avoid costly surprises down the line. Knowing what you’re getting into from day one can help make sure you’ll be able to keep up with payments and not get caught off guard by additional costs.
Finance charges may also apply if special services are requested, such as a late payment fee or cash advance fee. To avoid finance charges, it’s important to only borrow what you need and pay off your balance in full each month. Doing so can help you save money in the long run by avoiding costly finance charges.
Additionally, researching credit cards to find one with low finance rates will help keep costs down even further. By understanding finance charges and looking for ways to avoid them, you can make sure that your finances stay healthy and secure moving forward.
