Credit

What Is Buying On Credit?
When you buy on credit, you pay extra for the privilege of spreading your payments out over a period of time. You obtain money, goods, or services now, for the promise to pay a larger amount later on, often times with interest.

What Kinds Of Things Can I Purchase On Credit?
Today, virtually anything can be bought on credit. Big-ticket items such as automobiles, major appliances, furniture and jewelry are often bought on credit, but so are smaller items such as clothing, food and gasoline.

What Are My Duties As a Borrower?
That depends on the contract. Of course, you will always have to make timely payments. But the contract may impose other duties on you as well. Again, make sure you read that fine print so you know what you’re getting into!

How Much Interest Can They Charge?
In recent years, Missouri has removed most limits on interest rates, with very few exceptions. To check whether an interest rate is legal, contact a lawyer or the Missouri Division of Finance. Remember, you can only be charged a given interest rate if you agree to it. That’s another good reason to read and understand the contract before you sign it.

How Do I Get the Best Credit Terms Possible?
Everyone has a “credit score.” The higher your credit score, the more likely you are to get favorable offers for credit, including low interest rates. You can increase your credit score by timely paying off your debts. You can also get the best credit terms if you shop around! And who doesn’t love to shop?

Can I Pay Off My Loan Early?
You can always pay your loan off early, but sometimes your contract will impose a “prepayment penalty.” Check the contract to be sure. If you have the ability to make early payments, this may be a sign that this isn’t the best loan for you.

How Long Does It Take To Fix A Bad Credit Score Or Rating?
It depends on the seriousness of the past problems and the accuracy of the consumer report. If you believe any information on your credit report is wrong, you must follow the proper procedures to dispute the errors in accordance with the Fair Credit Billing Act. The good news is the Fair Credit Reporting Act prevents certain credit information from being included on your consumer reports after seven or ten years old.

Can My Lender Sell My Contract?
Yes. Most loans and other agreements to pay money can be sold. It is common for sellers to sell or assign their loans to a different bank or finance company. The new owner of the loan then has the right to collect payments from you.

What If I Stop Paying My Car Payment Or Home Mortgage?
These types of loans are based on “collateral,” which is anything of value that can be taken by the lender if you do not pay back the loan. So, if you stop paying, the creditor can take back your car or house! In some cases, the creditor must give you notice and an opportunity to cure the debt, but this is not always the case.

Am I Still Responsible For the Debt If I Give My Car Or House Back?
Yes. Unless the creditor agrees otherwise, your voluntary return of the collateral will not affect the creditor’s ability to collect the rest of the debt from you if the creditor gets less than the full amount of the debt when it resells the collateral.

What If the Collateral Is Destroyed Or Unusable?
Yes. For example, if you buy a car on credit and then destroy the car in a wreck, you still owe the debt even though you don’t have the car any more. Your insurance may cover the debt, but if it doesn’t, you are responsible for the payment.

What Is a Co-Signor Or a Guarantor?
A co-signer or guarantor is someone who signs a contract and agrees to be responsible for someone else’s credit payments. Think long and hard before agreeing to be a co-signer or guarantor for someone else. If that person doesn’t pay, the seller or lender will look to you for payment.

Can They Take Money Out Of My Paycheck If I Don’t Pay?
Yes. But in most cases, the creditor must first sue you and get a judgment first. Then your wages can “garnished,” meaning the money you owe can be directly taken out of your paycheck. Unless an exception applies, the creditor can take up to 25% of your after-tax earnings, or 10% if you are the head of your household,

What Laws Regulate Credit and Consumer Transactions?
The major federal laws that regulate credit are the Fair Credit Reporting Act, Fair Credit Billing Act and Fair Debt Collection Practices Act. For consumer transactions, the Missouri Merchandising Practices Act applies. The MMPA provides a remedy for consumers who are the victims of deception, fraud, misrepresentation, and other unfair consumer practices.

Are Student Loans Different Than Other Credit Agreements?
Yes, in some important ways. Generally, student loans cannot be discharged in bankruptcy, unlike most other forms of credit, with some exceptions like if you become disabled. Therefore, you should be particularly careful when taking out either public or private student loans. If your student loans are federally provided, various payment and discharge options are available and you should contact your lender.

What If I Need Legal Advice?
If you need help finding a lawyer, you can call The Missouri Bar’s Lawyer Referral Service at (573) 636-3635. Some local bar associations also have lawyer referral services. In St. Louis, call (314) 621-6681. In Greene County, call (417) 831-2783.

The Missouri Bar is a statewide organization that is dedicated to improving the legal profession, the law and the administration of justice for all Missourians. This website was a project of The Missouri Bar Leadership Academy Class of 2017-18.
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