Consumer Handbook to credit protection

Even when you understand the terms a creditor is offering, it's it's easy to underestimate the difference in dollars that different terms can make. Suppose you're buying a $7,500 car. You put $1,500 down, and need to borrow $6,000. Compare the three credit arrangements on the next page.

How do these choices stack up? The answer depends partly on y on what you need. The lowest cost loan is available from Creditor A. r A. If you were looking for lower monthly payments, you could get the then by paying the loan off over a longer period of time. However, you would have to pay more in total costs. A loan from Creditor B--also at a 14 percent APR, but for four years--will add about $488 to your finance charge.

If that four-year loan were available only from Creditor C, the the APR of 15 percent would add another $145 or so to your finance charges as compared with Creditor B.

Other terms--such as the size of the down payment--will also also make a difference. Be sure to look at all the terms before you make your choice.

Cost of Open-end Credit Open-end credit includes bank and department store credit cards, ards, gasoline company cards, home equity lines, and checkoverdraft accounts that let you write checks for more than your actual balance with the bank. Open-end credit can be used again and again, generally until you reach a certain prearranged borrowing limit. Truth in Lending requires that open-end creditors tell you the terms o the credit plan so that you can shop and compare the costs involved.

When you're shopping for an open-end plan, the APR you're told told represents only the periodic rate that you will be charged--figured on a yearly basis. (For instance, a creditor that charges 1% percent interest each month would quote you an APR of 18 percent.) Annual membership fees, transaction charges, and points, for example, are listed separately; they are not included in the APR. Keep this in mind and compare all the costs involved in the plans, not just the APR. Creditors must tell you when finance charges begin on your your account, so you know how much time you have to pay your bill before a finance charge is added. Creditors may give you a 25-day grac period, for example, to pay your balance in full before making you pay a finance charge.