Financial expert: Credit should not be taken lightly

Loans come in all shapes and sizes, and some don't look like loans at all.

Whether considering applying for a mortgage loan to purchase a house, an auto loan for new or used car, or a credit card, it is important to educate yourself on the implications and potential outcomes of borrowing money.

"Taking on credit should be done with plenty of thought on how it will affect one's financial plan and ability to achieve desired future financial goals," explained Jimmy Goodrum, senior vice president of Member Education and Outreach of the State Employees Credit Union.

In other words, credit is not something to be taken lightly. Here are some things to focus on when researching taking out a loan or applying for credit.

The first thing that usually comes to mind when considering borrowing money is the interest rate.

Rates often fluctuate, and sometimes shopping with different lenders can help you find an attractive rate. Since rates are not steady, if rates are currently high, you might want to consider waiting on taking out a loan, if possible.

It's also important to be aware of the long-term impact of interest rates.

If you have a $500 loan with an 18 percent rate, it's likely your minimum payment would be approximately $20. At first glance, this doesn't seem too bad, but once you take into consideration that this loan would last five years and interest alone would come to $216, it's a not-so-pretty picture.

Borrowing money will initially ding your credit score.

Often, even enquiring about loan approval or increasing an existing credit limit will have a negative impact on your score.

Further, and much more severe, damage can be done to it if you are late making payments or have a high amount of open lines of credit.

Lenders want to lend their money to people who are likely to pay them back. Therefore, you want to take good care of your credit score so that you can enjoy lower interest rates and higher credit limits.

If your credit score currently isn't as high as you would like, consider waiting to borrow and working to repair your score. Don't be afraid to use resources, like the {{a href="external_link-15768524" rel="nofollow"}}North Carolina Department of State Treasurer{{/a}}.

Borrowing money is a necessity for most people who want to own a home or car and for most families sending students to college, and most American consumers have at least one credit card.

It's imperative to know the details and fine print.

Research fees and charges for credit cards, and make sure you know all of the terms of a loan before agreeing to it.

And if a loan or service sounds too good to be true, it probably is. Many loans, like payday loans and term loans, are designed to prey on people who are already struggling with debt.

And avoid companies offering to "fix" your credit for a fee -- these are scams. You'll be better served to {{a href="external_link-15768525" rel="nofollow"}}utilize state or federal resources{{/a}} designed to protect you and help you manage your debt, and to make healthy financial decisions.