What is Credit?
What ia credit?
* Credit means you are using the money to pay for something else.
* It also means that you are making a promise to repay the money. For example, if you get a loan to buy a car, is using money from the finance company to buy the car, and is promising to pay the company by sending a sum of money every month. A loan for the purchase of an automobile is an example of an installment sale.
There are different types of credit and each of them has different payment options:
1. Credit for purchases in installments (eg housing loan or car). With the term loan was signed a contract to repay a fixed amount of the loan in equal payments over a period of time.
2. Revolving credit (eg bank credit cards or credit cards department stores). The revolving credit gives you the option to pay all their debts and making minimum payments each month. As payment, becomes available to reapply for a new loan.
3. Open accounts to 30 days (eg, travel and entertainment cards). These accounts must be paid in full each month.
You can use secured or unsecured credit.
1. Secured Credit: It means that should provide something of value, a collateral to secure payment of its debt. If you fall behind on payments, the lender can take possession of the item of value that originally guaranteed the debt. For example, a mortgage is a type of secured credit. Your home serves as collateral for the loan. If you do not pay the loan on time, the lender can keep your home. Other examples include: loans to buy cars, pawnshops and title loans.
2. Credit not insured: means you did not have to present anything of value to guarantee repayment. The unsecured credit lets you buy items on credit in exchange for their promise to pay the creditor. The creditor has no collateral, just your promise that you will pay. They can not come then take your car or your home to make you pay your bill by credit card. Examples include credit unsecured credit card debts, medical bills and personal loans.
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