Educational Resources - Borrowing Basics
Borrowing Basics
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Types of Credit
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Cost of Credit
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Applying For Credit
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Manage Your Credit
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Glossary
The Cost of Credit
When you get a loan, there are generally two costs you must pay: fees and interest.
Fees
A fee is an amount charged by a financial institution for the services it provides.
Examples of fees include:
- Maintenance fees
- Service charges
- Late fees
- Application Fees
Interest
Interest is the amount of money the bank charges you for letting you use its money.
Interest is only part of the total cost of credit.
Interest rates can be either variable or fixed.
- Variable rate means the interest rate may change during any period of the loan term,
as written in the contract.
- Fixed rate means the interest rate stays the same throughout the term of the loan.