What is credit, what types and their advantages and disadvantages

See what credit is and how it can be used by your school or digital business to boost sales and gain more enrollments.

There are many people who feel confused when it comes to finances. In addition to those who are not very fond of working with numbers and organizing accounts, even some specific words and terms from the financial universe can cause doubts.

To understand exactly what credit is and how it can help you achieve your goals, keep reading

What is credit?

Credit is a financial resource offered by an organization that believes you are a trustworthy person and will pay off your debt in the future.

It is a quick way to raise money for you to buy a product or service even if you don’t have the necessary money at the time of purchase. Thus, you make the payment only after the purchase, with the addition of an amount to remunerate the person who lent you the money – the famous interest.

What does it mean to pay on credit?

As mentioned in the previous topic, paying on credit means that someone is believing that you will honor the debt and make the payment commitment at some point.

Basically, credit is offered to those who have credibility in the market, that is, organizations believe they can trust that person to pay for the purchase made.

Difference between credit and debit

When we compare credit and debit, the main difference is the date on which the payment will be made .

While in credit the payment is made only in the future and with the installment option, with debit payment is made exactly at the time of purchase and in the full amount, at once .

What are the types of credit?
There are several types of credit available on the market, and they usually differ according to the purpose for which you are seeking that money.

Some of the most common types of credit are:

1. Credit card

Probably the best known type of credit , the credit card is a way of making purchases throughout the month and paying everything at the end of the period on a monthly basis. It also allows you to pay in a longer period, but with the addition of interest that increases the amount to be paid at the end.

What is revolving credit?

Related to credit cards, revolving credit is a type of credit offered to people who do not pay the full card bill by the due date, such as when only the minimum amount is paid.

In this type of credit, the difference between the invoice amount and the amount paid is transformed into aloan, starting to charge interest on the remaining amount until its payment.

2. Credit

Credit is the most popular term for installment purchases with added interest . This type of credit is usually common in department stores as it facilitates the purchase of products with a higher total value.

3. Overdraft

Overdraft is money offered by banks when you spend more than you have available in your checking account. This type of credit tends to charge very high interest rates, so it should be carefully analyzed and used consciously.

4. Payroll Loan

Payroll credit is deducted directly from the payroll of those who use this service, which usually offers special conditions for retirees, INSS pensioners and employees of associated bodies and companies.

5. Financing

Financing is a type of long-term credit, which is often used to make high-value purchases, such as cars and real estate.

6. Leasing

In the credit modality known as leasing, the organization offering the service makes the purchase of the product on behalf of the customer , who has the right to use it and who can buy the good in question at the end of the contracted period.

7. Pledge

In pledge, to get money, the customer offers some good as a guarantee that he will pay the contracted debt. If payment is not made, the item delivered may be sold by the organization that offered the credit.

8. Personal credit

Finally, personal credit, also known as a personal loan , is a service that can be used in any way the customer prefers, either to buy something or to pay some other debt.