Define Credit - Define Consumer Credit

Define Credit

What is Credit?

Credit is what you get when a company or an individual gives or lends you something with the promise of you repaying it at a future date.

What is Consumers Credit?

Sometimes personal credit is define as consumers

credit.

There are two kinds of consumers credit

1) Installment Credit

2) Revolving Credit

Installment Credit

Installment credit is when a buyer obtains a loan or

a mortgage whereas the monthly interest and the principle amount remains the same for the term of the loan.

Revolving Credit

Revolving Credit is what you get when you use credit cards. The credit card is a revolving charge because your montly payment changes from payment to payment.

Which Consumers Credit Is the Best Kind of Credit?

To me credit is credit. No matter which one you choose to use, use wisely or you can

find yourself in a whole lot of financial trouble.

But to answer the question I will say that installment credit is the best of the two.

There are two reasons I chose installment credit.

1) Because in installment situation you are not given the choice to increase your balance.

As you make the monthly payment, your balance comes down until the entire loan or mortgage is paid. Once it is paid in full, your credit with the lender is over.

If you desire to continue your relationship with the lender you will be required to fill out another credit application.

Then you must get approved.

The loan process starts all over again.

No matter how well you paid them on the prior loan, they will still check your credit , employment and salary to see if you are credit worthy before entering another credit transaction with you.

2) Since most installment credit are mortgages and auto financing you can build assets as you pay down the balance on your principle amount. Once you make the final payment you will have very good equity in your house or automobile.

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