An official website of the United States government
) or
https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites.
Consumer Loans & Credit Cards
Why Would You Need Loans or Credit Cards?
Paying cash for some larger expenses just isn’t realistic. You may need to secure a loan or use credit cards to purchase goods or services that cost more than your cash on hand. The basic difference between consumer loans and credit cards is that consumer loans provide a lump sum of money you pay down each month until your balance reaches zero, while credit cards give you a line of credit with a balance that's based on your spending. Deciding when to use a personal loan versus a credit card depends on how much money you need and how quickly you can pay it back.
Types of Loans
Loans provide you with money you might not currently have for large purchases, and let you pay back the money over a stated period of time. Many loan types are available, such as home loans, car loans, and student loans. Loans are either secured or unsecured.
Child Pages
Paying Off Credit Cards
If you have credit card debt and you're ready to lower it or pay it off, start with a repayment goal and strategy including paying more than the minimum payments that will help keep you on track. Learn more tips on how to manage your credit card debt.
Learn About Paying Off Credit Cards
Consumer Loan Calculators
Use online tools to help you understand what loans might work best for you, such as student loans and financial aid packages; consumer loan payments, principal and interest rate; monthly mortgage payments; and estimates based on your actual Social Security earnings record. These tools are easy to use and prompt you step by step with what data is needed to provide insights into what you could consider. Remember that these tools are one piece and can be used when discussing options with your bank or credit union.
Buy Now, Pay Later
Buy now, pay later or BNPL is a payment option that lets you make a purchase now with little to no payment and defer the payment for later dates, usually in four installments. You can often avoid interest or fees if the balance is paid in full and on time. Many retailers and online stores offer this payment option to attract customers and increase sales. This option allows you to purchase items immediately with no credit check, and usually no additional interest if paid back on time. Unlike credit cards, buy now, pay later companies don’t offer dispute protections if your purchase is faulty or a scam. Also, returns can be difficult for purchases made with buy now, pay later. When offered a buy now, pay later loan, think before making a quick decision. Read the fine print thoroughly and understand fees, credit impact, how to turn off autopay, and return policies.
Why Reading Account Disclosures is Important
A disclosure details all material facts relevant to a transaction. Federal or state laws require financial institutions to provide disclosures containing information on terms to their customers. Sometimes it’s hard to understand the provided information. However, disclosure statements contain the critical information you need to make an informed decision about which financial institution, and its products and services are right for you. Disclosure statements are legal documents. You should read the disclosures you receive when you open an account at your credit union. To understand your legal rights and responsibilities as well as the rights and responsibilities of the credit union, read the documents you receive from the financial institution. Read the entire disclosure document. Don’t be shy about asking for explanations, clarifications, and answers to your questions before you open an account or take out a loan. You should understand the disclosure statements prior to signing any documents.
Frequently Asked Questions
The credit union is authorized to charge daily interest on the outstanding balance between your payments. When you make a loan payment, the credit union calculates the interest that has accrued since your last payment and deducts this amount from your current payment. The remaining funds are then applied to the principal of the loan. Additionally, NCUA regulations allow you to pay off your loan early without incurring any penalties. This means you can make payments more frequently than specified in your loan agreement, which ultimately reduces the total interest you will pay over the life of the loan. Review your loan agreement with your credit union if you have any questions about the terms surrounding your loan.
If you forget to pay your auto insurance and your coverage lapses, or if your provider cancels your coverage, the credit union will impose forced-placed insurance. This insurance only protects the credit union's interest by covering the vehicle's value in case of damage, but it does not provide you with the standard coverage typical of regular insurance policies. If you switch insurance providers, ensure that you give the credit union a copy of your new policy. Failing to do so may lead them to assume the vehicle is uninsured and subsequently add forced-placed insurance. Also remember to ask if the credit union has limits on the dollar amount of insurance loss deductibles and be sure to review the terms of your loan agreement with your credit union.
Absolutely! You should feel free to ask the loan officer for clarification of the Truth in Lending Disclosures. These disclosures provide important details such as the interest rate, the total number of payments, payment due dates, the overall cost of the loan including interest, and any late fees that may apply if payments are missed. Additionally, if the loan officer inquiries about your interest in credit life and disability insurance, be sure to ask how it will impact your monthly payments and the total cost over the life of the loan.
Revolving and installment credit are two different types of credit that work in distinct ways. Installment loans and revolving credit are both important parts of your credit history.
- Revolving Credit: You have a credit limit that you can borrow against repeatedly. As you repay the borrowed amount, your available credit is replenished, allowing you to borrow again. You can make minimum monthly payments, but there is no fixed end date for repayment in full.
- Installment Credit: You receive a lump sum of money upfront and repay it in fixed installments over a set period. You make regular, fixed payments until the loan is fully repaid. The loan term is predetermined.
Understanding this distinction is important because while installment loans do not impact your credit utilization ratio, they still pay a role in your overall credit profile and can influence your credit score through factors like payment history and the total amount of debt you have. Revolving credit can offer more financial clues to your behavior because it shows how you manage varying expenses over time. Lenders can see if you consistently pay off your balance or if you carry a high balance from month to month; this can tell a lot about how you will manage future debt that you don’t have yet.