The word 'Credit' is drawn from the Latin 'Credo' which approximately equates to "I Think", a fitting significance to enhance a custom of trust that includes financial transactions. In the days of yore, borrowing and lending were purely done by assurance through the spoken word rather than the written word. Credit in olden days did not necessarily involve loan and the term was utilized to explain barter exchanges of products and services.
In contemporary economy, the term credit signifies a transaction involving money. Nowadays long drawn agreements and arrangements, most of them worded with legal terms that are beyond the comprehension of ordinary people, fulfill the obligations of loaning and getting.
Credit indicates credit or payment at a later date for receipt of money, services or items. The credit (late payment) is exactly what is referred to as "debt". Credit is given by a financial institution or lending institution to the customer or a debtor.
A specified sum of money provided to a specific for education, household, home, personal and vehicle functions is called a 'loan', likewise called consumer credit, consumer loaning or retail loaning.
Some broad categorizations of consumer loans
Consumer loans are defined by different types - convertible loans, installment loans, single loans, secured and unsecured loans, fixed-rate and variable-rate loans etc.
• Single loans - likewise called interim or swing loans; as the term recommends, they are for short-term financing requirement. Single loans have to be repaid at the end of the loan term in a lump sum consisting of rates of interest.
• Installment loan or EMIs - are paid at routine intervals, usually monthly. House and automobile loans come under this category. The longer the repayment term, more the capital as rate of interest computations vary.
• Secured loans - in this classification, you "safe" an asset, a home, cars and truck or any security that can be used to recover payment if you cannot make the ensured payments. Protected loans also apply to house and vehicle loan and because they are backed by sizeable security, interest charges on such loans are lower.
• Unsecured loans - are those that do not need collateral and normally provided only to debtors with outstanding credit ratings check here and histories, regularly business or high net worth individuals and interest rates are intensified.
• Fixed rate loans - a great portion of consumer loans fit this bracket. The exact same interest rate applies for the period of the loan term but when compared to variable rate loans, repaired rate loans attract more interest as there is the probability of the lending institution making losses if the market fluctuates.
• Variable-rate loans - in advance these loans have a lower rate of interest and there is the clause of adjustable rates of interest suitable at periodic periods of the loan-term. The rate of interest is based on an index governed by market patterns and an interest-rate spread determined monthly, six-monthly or annually.
• Convertible loans - are ones where the interest structure can differ from a fixed to variable rate of interest or vice-versa at a pre-determined time during the loan-term.
Protecting consumer credit or consumer loans can be an extremely taxing procedure and requires not only your informed and assessed inputs but also sound financial advice from a skilled financial consultant. It works to keep in mind the "Six C's of Credit", specifically Capacity, Capital, Character, Security, Condition and Credit.
Credit in olden days did not always involve loan and the term was used to describe barter exchanges of services and goods.
Credit suggests deferred payment or payment at a later date for invoice of money, services or products. • Installment loan or EMIs - are paid at routine periods, usually month-to-month. Home and vehicle loans come under this classification. The longer the repayment term, more the money flow as interest rate estimations differ.