Millions of people who take out credit cards or loans end up paying an interest rate up to 10 per cent higher than the one they saw advertised.
Many borrowers do not realise that the actual rate they will be offered can be a lot higher, potentially costing thousands of pounds in extra interest.
Many people use debt to fund purchases they would not otherwise be able to afford, such as a home or a car. While loans can be great financial tools when they are used properly, they can be great adversaries as well. To keep from taking on too much debt, you should understand how loans work and how money is made for the lenders before you begin borrowing money from eager lenders.
Loans are big business in the financial world. They are used to make money for the lenders—with that in mind, no lender wants to lend someone money without the promise of something in return. Keep this in mind as you research loans for yourself or a business—the way loans are structured can be confusing and cause large amounts of debt.
It’s important to know how loans work before you borrow money. With a better understanding of them, you can save money and make better decisions about debt—including when to avoid acquiring more or how to use it to your advantage.