Another often used form of credit is a mortgage loan. When Rich and Shelly decide to buy a house, they go to a bank or finance company to take out a mortgage. The loan is based on collateral and a specific number of payments are scheduled for a specified period of time. A car loan is also this type of credit. A third form of credit would enable Rich and Shelly to obtain a loan without collateral to make improvements on their home.
Payments are for a specific amount for a specified period of time.
These loans are made against a borrower's property and the amount of the loan is based on the equity in the home. Comparison of Credit Charges A wise consumer shops for the best credit terms, as though it were any other product or service. However, there are different methods to compute finance charges which will vary based on how the balance is calculated. The three alternative ways of figuring the balance are the average daily balance, the adjusted balance method, and the previous balance method. In determining the average daily balance, lenders apply the APR over the 30 day billing period.