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Glossary

Calculators

• Standard Calculator
• Value of an Investment
• Cost of Loan
• Cost of Mortgage
• Retirement Savings
• Credit Calculator
• Rule of 72

Consumer Loans

The basics of Consumer Loans

COMPARE INTEREST RATES of consumer loans

Compare two sample consumer loans. Note how the interest rate affects the total amount of interest paid. Interest rate comparison
Loan amount of $10,000 with a 5-year term

* Note: the final month’s loan payment may vary from the regular monthly payment. As for the interest rate, it’s important to shop around. Some lenders may give you a lower rate than others. In general, the shorter the term, the lower the total interest paid. By getting a 5% interest rate vs. 15%, this borrower would save over $3,000 interest over five years! Note: Always try to get a loan with the lowest interest rate you can. Remember: a strong credit score may help you qualify for a lower interest rate.

TRY IT OUT

Use the calculator below to figure out the details of a loan. This will help you get used to the term length and how much an interest rate on the loan can affect your monthly payment.

co-signing a consumer loan

A co-signer (also known as a co-borrower) is someone who assumes equal liability with the primary borrower for the repayment of a loan. If you’re considering co-signing a loan, consider the following:

• Co-signers Often Pay
• If You Do Co-sign

In some cases, co-signed loans that go into default, as many as three out of four co-signers are asked to repay the loan. If you’re asked to co-sign, you’re being asked to take a risk that a professional lender won’t take. Remember that if the borrower met the loan criteria, the lender wouldn’t require a co-signer.

In most states, if you co-sign and your friend or relative misses a payment, the lender can immediately collect from you. Also, the lender could decide to sue to collect. If they win the case, your wages and property may be taken.

Despite the risks, there may be times when you want to co-sign. Your child may need a first loan, or a close friend may need help. Before you co-sign, consider this information:

• Be sure you can afford to pay the loan. If you’re asked to pay and can’t, you could lose property, be sued or your credit rating could be damaged.
• Even if you’re not asked to repay the debt, your liability for the loan may keep you from getting other credit because creditors will consider the cosigned loan as one of your obligations.
• Ask the lender to calculate the amount of money you might owe. The lender isn’t required to do this but may if asked. You also may be able to negotiate the specific terms of your obligation.
• Ask the lender to agree, in writing, to notify you if the borrower misses a payment. That will give you time to deal with the problem or make back payments without having to repay the entire amount immediately.
• Make sure you get copies of all paperwork, such as the loan contract, the Truth-in-Lending Disclosure Statement, and warranties—if you’re cosigning for a purchase. You may need these documents if there’s a dispute between the borrower and the seller. The lender is not required to give you these papers; you may have to get copies from the borrower.
• Check your state law for additional co-signer rights.