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Code of financial conduct
If you follow these rules, you will likely lead a fiscally solvent lifestyle that will keep you out of trouble.
Smart borrowing

10 do's and don'ts for borrowing money

2. Do find the best interest rate
High interest rates can kill any repayment momentum. For instance, imagine making a monthly payment of $300 on a $10,000 credit card balance. If you find a card with a 4.9 percent interest rate card, that debt can be repaid in 36 months. But if your card sports an 18 percent rate, it'll take 47 months -- nearly a year longer -- to pay it off. See for yourself with Bankrate's credit card calculator.

High interest rates take a similar toll on loans of all stripes. But the difference may seem negligible on the surface. For instance, consider the monthly payment of a 60-month car loan. If you get a loan for $20,000 at 7 percent, the payment would be $396. At 10 percent, the payment is about $425. That's a difference of $29. While it may not seem like much, that money could be put to better use buying other items or, even better, saved. If you invest the money monthly in a fund earning 8 percent on average for five years, you'll have a neat sum of $2,130 tucked away.

But smart loan shopping doesn't stop with the interest rate, says Bolson. "Look at any fees that are associated with the loan. You may find a great loan at only 6 percent interest, but if they tack a bunch of fees on top of it, the effective rate may be more than the 8 percent loan you're comparing it to."

Finally, don't shop in one place; shop around for the loan that will save you the most money.

3. Do read the fine print
Many smart people have been unpleasantly surprised by loan details obfuscated by legal terminology or excruciatingly small fonts. Avoid joining that club by investing in a magnifying glass and familiarizing yourself with the terms and conditions of your loan.

For instance, during the infamous, and ongoing, mortgage meltdown, resetting adjustable-rate mortgages caught plenty of homeowners off-guard and many lost their homes.

In the Bankrate.com Financial Literacy poll last year, 34 percent of Americans didn't even know what kind of mortgage they had. In this year's poll Americans exhibited slightly more knowledge, with 26 percent in the dark about their mortgages.

While that's a glaring omission of financial self-knowledge, many less egregious sins are paid for every day, for instance, when potential borrowers disregard the universal default clause buried deep within credit card contracts or prepayment penalties on loans.

If you can't read every page of the loan contract, hire someone who can (a lawyer who's trained to understand that legalese may be a good choice). It's better to know about any contingencies that might arise and how they could affect your situation if you do end up signing on the dotted line.

-- Posted: Sept. 15, 2008
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