Common Cents
May/Jun 2009 Issue

A simple guide to securing credit

It’s easy in today’s economy to take advantage of credit and then wind up over-extended. Sometimes events like job loss or a major illness can lead to the inability to pay debt, but too often, consumers make bad decisions because they do not understand their options.

Know your product

If you borrow money, choose the type of credit that best meets your needs based on the amount, number and size of payments, as well as whether collateral is required. A good credit history improves the chances of getting an attractive interest rate on any type of loan, so check your score before you begin shopping for credit.

Here are important terms to remember:

  • A loan is paid out all at once and repaid over a specified period of time.
  • A line of credit allows the borrower to take different amounts as needed, up to a specific limit. The money is accessed by credit card or checks drawn against that line of credit.
  • Secured credit requires the borrower to designate collateral–such as a home or car– which the lender may take if there’s a default on the loan. Unsecured credit requires no collateral.

Get the facts

Crucial questions to ask the lender before borrowing include:

  • What will it cost, including all fees and interest?
  • Is the interest rate fixed or variable?
  • What is the monthly (or weekly) payment amount, and is it affordable?
  • Is collateral required?
  • What happens if I miss a payment? Will there be late fees and penalties and what are they?

AAA provides members with a variety of financial products, including the flexible Line of Credit. Call (888) 623-7256 and mention priority code FABQHS for more information.


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