Credit can be kind of tricky to understand. The important thing to know is that poor money habits now can make your life pretty miserable for years to come. This is your chance to start out right!
Read this info, complete the short quizlet at the end and get 2GB flash drive when you apply for your loan at Linn Area Credit Union.
|Interest Rate||Total Amount Paid (with Interest) Over 5 Years|
You would pay about $445 more to borrow $5,000 for five years at 12% APR. The higher the amount of the loan, the bigger the difference.
Length of loan
Another key bit of info is the loan term, or how long the loan lasts. The longer the loan, the more interest you’ll pay over that time. Car loans, for instance, are usually made in 3 to 7 year terms. The shorter the term, the less interest you’ll pay – but your payment will be higher too – because you’re paying for the whole amount of the car in fewer payments.
The pesky part of loans is that you have to pay them back. Payments are made each month and you can do it one of several ways:
- Automatically. Your payment can automatically come out of whichever account you pick on the same day each month so you don’t have to write a check and send it. You do have to make sure there’s enough money in that account, though.
- Online Bill Payer. Make your loan payment via computer each month without having to pay postage. You can even set up reminders to let you know when it’s time to make your payment.
- By check. We can give you a loan payment book where you turn in a loan payment stub along with a check each month. You can either mail this in or drop it off at any of our branches.
If you aren’t going to be able to make your loan payment on time, contact the credit union right away. Sometimes we can make arrangements to help you.
Linn Area Credit Union is a fabulous place for a first loan because you’ll get a good interest rate and we’ll work the payments around what you can afford.
Your credit score is important
Lenders use a credit report to help decide if you’re responsible enough to pay back a loan before they grant you a loan. Your credit report shows all credit cards, loans and store charge cards you’ve had, and if you’ve paid your bills on time. It even has information about your employment. It shows your credit history for the past 7 to 10 years.
These credit reports also come with your credit score. This is a number used to rate how good your credit is. The higher the score, the better your credit rating. It’s a fact… if you have a good credit rating it will be easier for you to get a loan and borrow at lower interest rates than someone who has a bad credit rating.
Skipping payments or making late payments (on a loan, credit card, electricity bill, etc.) will bring your credit score down. Some of these slip-ups can do a lot of damage and it will take a LONG time to bring your score up again. This information all goes on your credit report and stays there for years.
Start building good credit now
If you want low interest rates on loans, you have to have good credit. Our advice:
- Always make your payments on time. We can’t stress enough how important this is.
- Keep some money in savings to make your payment(s) in case you lose your job or have some unexpected expenses come up.
- Don’t borrow more than you can afford to pay back.
- Pay off debts as quickly as you can. You can make bigger loan payments than required and save money on interest. We don’t penalize people for paying a loan off early and it looks good on your credit report!
- Start out small. Get a credit card and charge a couple small purchases each month. Then pay the entire balance on the statement before the due date. Or if you get a car loan, make sure every payment is made on time.
Follow the tips above and you’ll be well on your way to world domination. Well, to at least proving that you are a responsible person who takes repaying their debts seriously. That’s the key to building good credit.