Types of credit
Credit can be used to buy things like furniture, houses, cars, etc and pay it off over a short or long period. The type of credit you need depends on the amount you want to borrow.
The three different types of credit are:
- Short-term credit
This type of credit allows you to borrow money that you need to repay in a few months. People usually use this type of credit to cover unexpected expenses. Credit cards and personal loans are good examples of short-term credit.
- Long-term credit
You can borrow a larger amount of money and pay it back it over a number of years. People use this type of credit to buy big purchases like cars and houses.
- Credit accounts
This type of credit enables you to buy things like furniture or appliances and pay them off over time. Interest is charged on the total amount and included in your monthly repayment.
Remember: Every type of credit costs money, so it’s important to shop around to compare costs and see which type of credit is best for you. You should also keep a healthy credit score by paying off your accounts on time.