Let’s look at Question #2 – Have I found the best credit use or “buy” that I could?

In case you missed Part 1 we looked at the question of – Using credit for this purchase?

Now let’s look at question 2:

The main sources of consumer credit are:

(a) Lending Institutions

• Credit Card Companies – VISA, MasterCard, American Express, Discover
• Credit unions
• Personal loan departments of banks
• Small loan companies
• Sales finance companies that take over credit “paper” from dealers.
• Pawnshops

(b) Retail sales establishments

Department stores, specialty shops, appliance stores, auto sales, for example. Such companies as Sears, JC Penney’s, The Gap, Victoria Secret and many more offer credit as a service.

The charges from these different sources vary a great deal. Take time to investigate. Find out what kind of service you can expect, what the cost and repayment terms will be. Do this before you make a bargain, for once you sign a contract, you’re committed to carry out your part.

Find Out the Dollar Cost. You probably compare prices on shoes, dresses, coats, housewares. Why not on the cost of credit?

Credit costs vary widely among different lenders and among stores that sell on the installment plan. In fact, costs may differ considerably among the various “plans” available from a single store.

It will pay you to take time to get the facts. You need to know more than the down payment and monthly (or weekly) payments — so take time to check your contract. The contract should give you

• (a) how much is to be financed ;
• (b) the amount of each installment payment ; and
• (c) the number of installments.

This is the way you figure cost: Multiply the amount of the monthly payment by the number of payments to be made. From this figure subtract the amount that is to be financed. The difference will be the dollar cost of credit.

EXAMPLE :1

A refrigerator costs $300 and can be paid for by making a $12 down payment and 12 monthly payments of $25.92 each.

Multiply payment amount X number of months to be made ($25.92 x 12) = $311.04

Subtract the amount financed (Cash price minus down payment) $300 – $12 = $288.00

Dollar Cost of Credit $ 23.04*

Total cost when bought on credit ($300 cash price plus $23.04
credit cost) $323.04

Note: The cost of credit equals $8 per $100 per year on unpaid balance of $288. This is equivalent to a simple annual rate of 14.8%.

Now on to Question #3 – How Is My “Credit Score or Rating”?