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                         | Step 24:
Understand the cost of credit It is important to carefully weigh your options before making a credit decision. When you sign or cosign an application for credit, you are agreeing to all its terms. Moving forward, commit to understand everything to which you are agreeing. At the very least, you will want to compare the following terms before making a borrowing decision: Interest rate or APR - APR is the annual interest rate you will be charged on a loan or the unpaid balance of a credit card. Length of the loan - as the length of the loan increases, the monthly payment will decrease, but the total interest charge will increase. Finance charge - total cost of the loan stated in dollars. Credit limit - the maximum amount you can borrow at any time. Minimum monthly payment - the smallest payment your creditor will accept. Grace period - number of days you have to pay your bill in full before interest is charged. Over the limit and late fees - the amount you will be charged if you are late with a payment or go over your credit limit. Here is a calculator on Sorted to calculate the cost of an HP. http://www.sorted.org.nz/calculators/hire-purchase/ When entering into a contract that is interest free for a period make sure you understand all the implications of your contract and take every opportunity to make payments sufficient to pay in full before interest will start. In all cases if you can save to pay cash for the item you will be far better off and even feel proud of yourself  Commit to making informed borrowing decisions, and understand the costs.
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