How To Read Loan And Credit Card Agreements

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The devil is always in the details, and nowhere is this more evident than when looking at the pesky fine print on credit card applications and loan agreements. The U.S. government has even legislated these evil little notes when they passed the Truth in Lending Act (TILA) legislation requiring entities issuing credit to consumers to disclose certain facts prior to completing the transaction. Disclosure provides the information, but knowing what to do with that information is what helps you make wise financial decisions. Read on to uncover the hidden fees, terms and rules that could break your piggy bank.

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Loans
Loan agreements are packed with pages of tiny print and mind-numbing details. Five items to look for in a loan agreement include:


Finance Charge
This number quantifies the cost of credit. In addition to providing (in dollars and cents) the amount of interest you will pay over the life of your loan, the finance charge section will also include any associated charges required in order to receive the loan (such as document preparation fees).
Annual Percentage Rate (APR)
Annual percentage rate (APR) is the interest rate that you pay to a creditor on a yearly basis. This number factors in all expenses, including the interest on the loan, origination fees, discount points, etc. It's the reason a loan advertised at an 8.0% interest rate often results in a loan payment based on an 8.5% interest rate. APR is the amount to use when comparing loans from different potential lenders.

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