Credit gives the word to pay either by repaying it or returning those resources later. In other words, this credit is the method of making the reciprocity formal, legally enforceable, and of course, extensible to a vast group of people who are not related.
However, the resources provided may be financial or have goods or services, like consumer credit. The credit covers any form of deferred payment. Credit generally gets extended by the creditor, the debtor or lender, and sometimes the borrower.
A finance charge in simple terms is a charge that a lender charges on the borrower for using their money. It is the total amount of the interest and various other charges the borrower is required to pay throughout the entire term of the loan in return for raising that loan. A finance charge also includes but is not limited to any charge paid to increase the term of the loan, credit card annual maintenance charges or fees levied if the repayment of the amount on such credit card is not made within the grace period, late fee charges, and any account transaction fees charged by your bank to process the loan or during its repayment.
Any institution in the business of lending money does not do it to help the borrowers, but to make a profit for themselves and finance charge is the primary source of income for such institutions as it is a way for them to earn profits on the money they lend. Some other key points of finance charges are:
The finance charge is levied either on a percentage basis on the total amount of the loan raised in case of extension of the loan or in the form of flat fees in case of account handling charges etc.
A loan raised by a borrower to buy a house is always a long-term loan. Borrowers of such loans or any other form of mortgage loans often end up paying a huge amount of money in the form of finance charges, sometimes even higher than a significant percentage of the original amount borrowed.
In order to reduce the amount of finance charge on a housing loan, or other long-term loans, the borrowers can choose to pay extra money on the principal amount with each of their monthly payments, which would allow them to save a huge amount of money at the end of the loan period.
Paying extra on the monthly instalments would not only settle the home loan earlier but also reduce the outstanding loan balance at the end of every month, thus significantly reducing the interest payable.
