QandAs: Loans

What is a Finance Charge?

Answer:
Banks, credit unions, and financial institutions lend

money, in turn, borrowers can purchase a new home, automobile, etc. Moreover, credit card companies make it possible for consumers to "buy now, and pay later." In order for these types of business to continue lending money, they must charge borrowers a fee. This fee is called a finance charge, and it includes any interest added to the loan balance, service fees, late fees, balance transfer fees, etc. Finance charges vary, and depend on the amount borrowed and the interest rate received.

There are several different ways to keep finance charges low. For starters, consumers should borrow the least amount possible. If you borrow a large sum of money, try and payback the money within a short timeframe, or least before the due date. Lenders and credit card companies profit is many ways. When borrowers submit a late payment, the lender will charge a late fee. Likewise, the borrower's interest rate on the loan may significantly increase, which inflates monthly payments. A few lenders, especially mortgage lenders, allow borrowers a five-day, 10-day, or 15-day grace period. Person who submit a payment or payoff a loan balance before the grace period concluded are not charged a finance fee.