All you need to know about credit
What is credit ?
Types of credit
One can borrow money either through loans and credit card accounts.
When you take out a loan you get your money all at once, then you must make specific payments to pay the loan back by a specific date. When using a credit card the amount you purchase is added to your account. The account has no specific payoff date you are only required to pay off a minimum each month.
Student loans - designed to help student pay for a higher education tuition, books and living expenses. Its different from other loans because the interest rate may be lower and the repayments may be deferred while the student is still in school.
Secured loans- is backed by something of value to ensure payment
Unsecured loan- not backed by collateral leander gets credit based on your creditworthiness alone. This is also known as a personal loan.
How to qualify for credit
To qualify for credit you must demonstrate your credit worthiness; by proving that you are reliable to pay back a loan. Lenders judge one's credit worthiness by one's capital, capacity and character. They can see this through Loan applications, which show your assets income and liability, and the credit bureau, which collects information on consumer credit and sells it.
Assessment of the likelyhood that a borrower will pay back the money they borrowed.
A number assigned to a person indicating their capacity to pay back a loan.
Interest Rate (APR)
Annual rate that is charged for borrowing while using a credit card.
Credit Cards: What you need to know
Benefits and costs
With a credit card you can make a large purchase now and pay it off in smaller chunks. It also makes budgeting easier, and it's easier than carrying around a wad of cash. It also allows you to build up your credit score. However, you can easily go into debt if you are not careful with your spending. The ease of credit card use can cause you to overspend. interest rates can also make even the smallest debt seem large over time.
Smart consumers: Don't fall into the credit trap
You should choose a credit card that is right for your needs, if you carry a balance, you can find credit cards that spezaize in low interest rate. You should also avoid using the card for discretionary spending, because that can easily lead to debt. And lastly make sure you are going to be responsible with your spending before acquiring a credit card. It is better to not own a credit card then to own one and misuse it.