Credit Cards and Home Equity Loans Read the Fine Print
These days, everyones lives are burdened
with paperwork. With newspapers, magazines, bills,
junk mail, and who-knows-what taking up space in their
day, few people have time to look at every piece of
paper that comes their way. Unfortunately, its becoming
more and more necessary to carefully examine bills
and contracts, as various penalties are finding their
way into the fine print of credit card bills, home
equity loan and mortgage contracts. It truly pays
to take the time to read the fine print in these documents.
Up to one third of major credit card
issuers now include a universal default clause in
their credit card terms. The UDC allows the credit
card company to raise the interest rate on the account
if the cardholder pays his or her bills late. This
can apply even if the credit card bill is paid
on time! It is important to find out if your credit
card terms include a UDC, as your interest rate could
be affected by whether or not you pay your telephone
bill on time. This is just one of many ways that credit
card companies are increasing their profits, but it
isnt one that theyre willing to advertise. When a
letter comes in the mail from your credit card company
that says change in your credit card terms or something
like it, make sure that you read it. Failure to do
so could raise the interest rate on your credit card
substantially.
Another fine print issue that has been
turning up recently is the prepayment penalty that
is now being attached to up to half of all mortgages
and home
equit y loans. The volatile nature of interest
rates in the lending market has inspired many homeowners
to repeatedly refinance their homes in the last few
years. Lenders often hold a mortgage for only a few
months before the borrower finds a lower rate and
refinances, paying off the original loan. In order
to protect the profits from lending the money, up
to half of all lenders are now requiring a substantial
penalty if the loan is paid off prior to a specified
date. These fees can amount to several thousand dollars
on a primary mortgage and several hundred dollars
on a home equity loan. Most borrowers would not be
pleased to go through the process of refinancing their
home, only to find out at closing that they owed a
penalty of five thousand dollars. Instead, be sure
to read the fine print in your mortgage or home equity
loan documents before you sign them.
As the lending and credit markets become
more and more competitive, lenders are doing more
and more to increase their profits. They are not necessarily
doing so in obvious ways, however, so it is always
in your best interests to read any document carefully
before you sign. Your failure to do so could cost
you quite a bit of money.
Copyright 2005 by Retro Marketing. Charles
Essmeier is the owner of Retro Marketing, a firm devoted
to informational Websites, including End-Your-Debt.com,
a site devoted to debt
conso lidation and credit counseling, and HomeEquityHelp.com,
a site devoted to information regarding home
equit y loans.
