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Personal loans 101

If you happen to find yourself in a tight spot, borrowing money can help set you back on the right path. However, doing so without a full understanding of the facts can hinder your finances in the future.

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If you happen to find yourself in a tight spot, borrowing money can help set you back on the right path. However, doing so without a full understanding of the facts can hinder your finances in the future.

Photo courtesy of Getty Images

Photo courtesy of Getty Images

“When faced with a financial emergency, most people don’t think through how borrowing money might affect them down the line,” said Susie Irvine, president and CEO, American Financial Services Association Education Foundation. “With so many options available, it’s relatively easy to get a loan, but the impact on your credit and what it actually costs you over time can vary a great deal.”

The two most common types of small-dollar borrowing are traditional installment loans and payday loans. Knowing the ins and outs of each type of loan and how they work can help you make the best decision for your financial situation.

Traditional installment loans are one of the oldest forms of finance transactions and provide credit to individuals and families who need access to credit to meet an immediate need, such as vehicle repairs, household appliances or medical expenses. Traditional installment loans are “plain vanilla” loans with transparent, easy-to-understand repayment terms, due dates and payment amounts. With regular, manageable payments of principal and interest, the borrower has a clear roadmap out of debt. Best of all, traditional installment lenders report payment activity to credit bureaus, improving a borrower’s credit score when payments are made on time.

Payday loans are repaid in a single balloon payment at the end of the loan period. This payment is usually due in less than 30 days and frequently the term is as short as 14 days. Payday lenders do not assess ability to repay, relying instead on a postdated check or similar access to a borrower’s bank account as assurance the loan will be repaid. If a borrower cannot afford to repay a payday loan in full when it comes due, they are left with no option but to refinance the entire balance of the initial loan. Although payday loans may appear to provide a quick and easy solution, this single, lump-sum payment can lead to significant problems for the borrower. Payday lenders have also been sanctioned in many states, and at the federal level, for abusive practices.

Is an Installment Loan Right for You? When deciding whether to obtain a loan, consider the benefits and responsibilities. According to the American Financial Services Association Education Foundation, an installment loan:

  • Obligates future income. You’ll be required to set aside a certain amount of future income for loan payments.
  • Requires discipline. Borrowing wisely means not borrowing more than you can handle. Don’t let the thrill of buying obligate you to more than you can afford.
  • Makes it possible to meet unexpected expenses. The ability to borrow and make affordable payments can be helpful if an emergency arises that requires extra money.
  • Allows you to obtain products and services now and pay for them later. A loan can provide an opportunity to purchase bigger-ticket items and use them right away.

LOAN LANGUAGE

When you take out a loan, it’s important to understand the complete cost of repaying the amount you’ve borrowed. It’s a good idea to compare offers from multiple creditors and understanding these terms will help you calculate the real cost of borrowing to get the best deal.

Here is a list of common loan terms from the American Financial Services Association Education Foundation:

  • Amount Financed: The total dollar amount of the credit that is provided to you.
  • Annual Percentage Rate or “APR”: A measure of the cost of credit expressed as a yearly rate.
  • Credit Insurance: Optional insurance that is designed to repay the debt if the borrower dies or becomes disabled.
  • Finance Charge: The dollar amount you pay to use credit.
  • Fixed Rate Financing: The interest rate and the payment remains the same over the life of the loan. Equal monthly payments of principal and interest are made until the debt is paid in full.
  • Length of Payment: The total number of months you have to pay the credit obligation.
  • Late Payment Fee: A fee that is charged when payment is made after its due date.
  • Monthly Payment Amount: The dollar amount due each month to repay the credit agreement

KEYS TO CREDIT SUCCESS

The American Financial Services Association Education Foundation offers this advice to help ensure that your interests are protected when you borrow money:

  • Budget your money. Provide your monthly spending plan when you meet with creditors. It will help them make a responsible decision about the amount of credit you can afford.
  • Don’t overextend. Be sure you can pay back the loan. Don’t bite off more than you can chew.
  • Get personal. If possible, borrow from someone you actually can see and talk to in person. Get comfortable with the lender, and let the lender get comfortable with you.
  • Shop. Compare costs. Shop for credit like you would shop for anything else.
  • Beware of “now or never” offers. If it’s a good deal, it will probably still be there after you’ve had time to think about it. Don’t be pressured into making a quick decision.
  • Ask questions. Don’t sign on the line until all your questions have been answered.
  • Read the contract. Don’t sign a contract that you don’t understand or has any blanks. A signed contract with blanks can be completed as anyone wishes and it will be legally binding.
  • Keep your contract in a safe place. It’s important to keep all paperwork relating to your credit obligations. If questions come up later, you’ll have your agreement in writing.
    Make your payments on time and in full. This is one of the best ways to build a good credit history.
  • Additional products are not required to get a consumer loan. Optional products that may be offered for purchase with your loan include motor club membership, term insurance or warranties.

To learn more about affordable credit options that are available to help you better manage your money, visit installmentloanswork.com.

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NewsMakers

Myth busted: Healthy habits take longer than 21 days to set in

Planning and intending to complete a new behaviour can also help solidify a new habit, so make sure you continue to make time to include your new healthy habits into your everyday activities. This could be as easy as laying out your gym clothes the night before a morning walk or having a healthy lunch ready to go in the fridge.

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We’re nearly two months into 2025, but if you’re struggling to hold onto your New Year’s resolution, stay strong, as University of South Australia research shows that forming a healthy habit can take longer than you expect.

In the first systematic review of its kind, UniSA researchers found that new habits can begin forming within about two months (median of 59–66 days) but can take up to 335 days to establish.

It’s an important finding that could inform health interventions to promote healthy behaviours and prevent chronic disease.

In Australia, chronic disease contributes to a large portion of the disease burden. Many conditions, including type 2 diabetes, heart disease, lung diseases and stroke, can be prevented by changing unhealthy habits or lifestyle factors. 

University of South Australia researcher, Dr Ben Singh, says that contrary to popular belief, healthy habits take far longer than three weeks to lock down.

“Adopting healthy habits is essential for long-term well-being but forming these habits – and breaking unhealthy ones – can be challenging,” Dr Singh says.

“At the beginning of the year, many of us are setting goals and making plans for the months ahead –things like being more active, cutting back on sugar, or making healthier food choices – but while common wisdom suggests that it takes just 21 days to form such habits, these claims are not evidence-based.

“In our research, we’ve found that habit formation starts within around two months, but there is significant variability, with formation times ranging from four days to nearly a year.

“So, it’s important for people who are hoping to make healthier habits not to give up at that mythical three-week mark.”

The study of more than 2600 participants also found that certain factors can influence successful habit formation.

“When trying to establish a new healthy habit, success can be influenced by a range of things including how frequently we undertake the new activity, the timing of the practice, and whether we enjoy it or not,” Dr Singh says.

“If you add a new practice to your morning routine, the data shows that you’re more likely to achieve it. You’re also more likely to stick to a new habit if you enjoy it.

“Planning and intending to complete a new behaviour can also help solidify a new habit, so make sure you continue to make time to include your new healthy habits into your everyday activities. This could be as easy as laying out your gym clothes the night before a morning walk or having a healthy lunch ready to go in the fridge.

“Tailoring habit-building strategies into our day and making plans on how we can achieve them, will put you in a position for success.”

While more research is needed, researchers say that these findings can guide public health initiatives and personalised programs that support sustained and healthy behaviour change.

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NewsMakers

Sitting too long can harm heart health, even for active people

More than roughly 10-and-a-half hours of sedentary behavior per day was significantly linked with future heart failure (HF) and cardiovascular (CV) death, even among people meeting recommended levels of exercise.

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More time spent sitting, reclining or lying down during the day may increase the risk of cardiovascular disease (CVD) and death, according to a study in JACC, the flagship journal of the American College of Cardiology, and presented at the American Heart Association’s Scientific Sessions 2024.

More than roughly 10-and-a-half hours of sedentary behavior per day was significantly linked with future heart failure (HF) and cardiovascular (CV) death, even among people meeting recommended levels of exercise.

“Our findings support cutting back on sedentary time to reduce cardiovascular risk, with 10.6 hours a day marking a potentially key threshold tied to higher heart failure and cardiovascular mortality,” said Shaan Khurshid, MD, MPH, a cardiologist at the Massachusetts General Hospital and co-senior author of the study. “Too much sitting or lying down can be harmful for heart health, even for those who are active.”

Insufficient exercise is a known risk factor for cardiovascular disease (CVD). Over 150 minutes of moderate-to-vigorous physical activity per week is recommended by current guidelines to promote heart health. However, study experts say exercise is only a small fraction of overall daily activity, and the current guidelines don’t provide specific guidance on sedentary behavior which accounts for a much larger portion of daily activity, despite evidence that it’s directly linked with CVD risk.

This study examined the amount of sedentary time at which CVD risk is greatest and explored how sedentary behavior and physical activity together impact the chances of atrial fibrillation (AF), heart failure (HF), myocardial infarction (MI) and CV mortality.

Among the 89,530 study participants of the UK biobank, the average age was 62 years and 56.4% were women. Participants submitted data from a wrist-worn triaxial accelerometer that captured movement over seven days. The average sedentary time per day was 9.4 hours.

After an average follow-up of eight years, 3,638 individuals (4.9%) developed incident AF, 1,854 (2.1%) developed incident HF, 1,610 (1.84%) developed indecent MI and 846 (0.94%) died of CV causes, respectively.

The effects of sedentary time varied by outcome. For AF and MI, the risk increased steadily over time without major shifts. For HF and CV mortality, increase in risk was minimal until sedentary time exceeded about 10.6 hours a day, at which point risk rose significantly, showing a “threshold” effect for the behavior.

For study participants who met the recommended 150 minutes of moderate-to-vigorous physical activity or more, the effects of sedentary behavior on AF and MI risks were substantially reduced, but effects on higher risk of HF and CV mortality remained prominent.

“Future guidelines and public health efforts should stress the importance of cutting down on sedentary time,” Khurshid said. “Avoiding more than 10.6 hours per day may be a realistic minimal target for better heart health.”

In an accompanying editorial comment, Charles Eaton, MD, MS, Director of the Brown University Department of Family Medicine, said the use of wearable accelerometers has shown that exercise is significantly over-estimated by self-report and sedentary behavior is under-estimated.

Eaton said that replacing just 30 minutes of excessive sitting time each day with any type of physical activity can lower heart health risks. Adding moderate-to-vigorous activity cut the risk of HF by 15% and CV mortality by 10%, and even light activity made a difference by reducing HF risk by 6% and CV mortality by 9%.

“This study adds to the growing evidence of a strong link between sedentary behavior and cardiovascular health,” said Harlan M. Krumholz, MD, SM, Harold H. Hines Jr. Professor at Yale School of Medicine and Editor-in-Chief of JACC. “The findings strongly suggest that we need to get people moving to promote better health.”

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Cardio-fitness cuts death and disease by nearly 20%

Running, cycling, or swimming – if you regularly exercise, you’re on track for a long and healthy life.

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Running, cycling, or swimming – if you regularly exercise, you’re on track for a long and healthy life.

This is according to a study – “Cardiorespiratory fitness is a strong and consistent predictor of morbidity and mortality among adults: an overview of meta-analyses representing over 20.9 million observations from 199 unique cohort studies” – that was published in the British Journal of Sports Medicine.

The study comprised of 26 systematic reviews with meta-analysis representing more than 20.9 million observations from 199 unique cohort studies. It is the first study to collate all the scientific evidence that looked at the prospective link between cardiorespiratory fitness and health outcomes among adults.

The study found that:

  • for every 1-MET increase in cardiorespiratory fitness – the amount of energy used for quiet sitting – a person can reduce their risk of death by 11-17%, and specifically, their risk of heart disease by 18%.
  • an increased cardio fitness level will reduce your risk of death from any cause by 11-17%.

Senior author Grant Tomkinson said that cardiorespiratory fitness is probably the most important type of fitness for good health. “Cardiorespiratory fitness (or CRF) is your ability to perform physical activity for a long period of time like running, cycling, and swimming. And in this study, we found prolonged cardiorespiratory fitness is strongly and consistently associated with all types of premature death and incident disease – spanning heart failure, depression, diabetes, dementia and even cancer.”

Tomkinson added that the researchers “summarized the evidence linking CRF to numerous health outcomes and found that those with low levels of CRF are far more likely to die early or develop chronic conditions like heart disease later in life.” Specifically, “we found that every 1-MET increase in CRF, which is the amount of energy used when sitting quietly, reduced the risk of early death from any cause and heart failure by 11–17% and 18%, respectively. For most people, a 1-MET increase in CRF can be achieved through a regular aerobic exercise program.”

For Tomkinson, the message is quite simple: if you do a lot of “huff and puff” exercise, then your risk of dying early or developing diseases in the future is reduced. If you avoid exercise your health may suffer.

Chronic health conditions are an ongoing cause of poor health, disability, and premature death. In Australia, an estimated 11.6 million people (47%) have a chronic and debilitating health conditions, which contributes to two thirds of the burden of disease.

“Clearly, cardiorespiratory fitness is as an important factor for good health. If you are already exercising, this is good news; but if you know you need to up your fitness and movement, then this is a timely reminder,” co-author Dr Justin Lang said.

People can make meaningful improvements through additional moderate physical activity, such as brisk walking at least 150 minutes a week, or kayaking (which means grabbing the Best Folding Kayak).

“And as they improve their fitness, their risk of death and disease will decline. But the onus for improvement should not just sit with the individual, it should also be routinely assessed in clinical and public health practice, so that we can support people to improve their health outcomes,” Lang said.

Through regular assessment, clinicians and exercise professionals could better identify adults at greater risk of early death and initiate exercise programs aimed at increasing CRF through regular physical activity.

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