Credit is a sum of money that is provided by an institution or private person to another institution or private person. This sum must be repaid at a later date. The institution or person providing the money is known as the creditor or money lender. The instituion or person receiving the money is known a debitor or borrower. The largest and most well-known group of money lenders are banks. Creditors will typically require a quid pro quo for the provision of a sum of money, mostly in the form of interest. The amount of interest that needs to be paid depends on a large number of factors such as the term of the credit period, the amount of credit required and creditworthiness of the debtor.
Types of Credit
Revolving Credit is a product that enables a person or institution to continually withdraw funds and then repay them. You pay interest based on the amount of money that has been withdrawn. The interest rate for this product is variable and the product doesn’t terminate after a pre-defined term, so you continually have access to the money. A Personal Loan is a one-time loan that enables you to borrow a sum of money that has to be repaid within an agreed period of time. You pay a set amount every month a portion of which is the paying back of the money that’s been lent and a portion is for the interest on the loan. The interest rate is set at the beginning of the lending period for the entire length of the loan.