Types of Credit
By: Graham Pedersen
Basics of Cedit
What is Credit?
Credit gives the ability to buy stuff without having to pay for it up front, you have to pay later.
What are the forms of credit?
Secured: With this kind of credit, the creditor guarantees that it will be paid back by putting a lien on an asset you own. Car loans, mortgages, and home equity loans are common types of secured credit.
Unsecured: When your credit is unsecured, you simply give your word to the creditor that you will repay what you borrow. Credit card, medical, and utilities bills are all examples of unsecured credit.
Revolving: If your credit is revolving, the creditor has approved you for a set amount and you can access the credit whenever you want and as often as you want. In return, you must pay the creditor at least a minimum amount on your account’s outstanding balance each month. Credit cards and home equity lines of credit are examples of revolving credit.
Installment: With installment credit, you borrow a certain amount of money for a set period of time and you repay the money by making a series of fixed or installment payments. Examples of installment credit include mortgages, car loans, and student loans
What costs and benefits are associated with credit?
- Convenience--Credit cards can save you time and trouble--no searching for an ATM or keeping cash on-hand.
- Record keeping--Credit card statements can help you track your expenses. Some cards even provide year-end summaries that really help out at tax time
- Instant cash--Cash advances are quick and convenient, putting cash in your hand when you need it.
- Build positive credit--Controlled use of a credit card can help you establish credit for the first time or rebuild credit if you've had problems in the past--as long as you stay within your means and pay your bills on time.
What determines if someone gets credit and how much they get?
What is a credit card?
A small plastic card issued by a bank, business, etc. allowing the holder to purchase goods or services on credit.
Where can you use credit cards?
What are the benefits and costs of using credit cards?
Shopping for Credits
- Annual Rate- 0% for 15 months
- APR- 14.24%- 23.24%
- Fees- $0
- Incentives- If you spend $500 you get $150 back in the first 3 months
- Annual Rate- 0$ for 12 months
- APR- 13.24% - 23.24%
- Fees- $0
- Incentive- You get 1% cash back for every purchase, 2% for groceries, and 3% on gas