What You Don’t Know Could Hurt You
Nowadays, people tend to take credit to fulfill their needs. Credit is a term that refers to an agreement between two parties, a lender and borrower.
A lender agrees to settle a certain sum of money to a borrower with an agreement. The agreement includes an obligation of the borrower to pay back the money at a later date with an interest on the outstanding balance.
Let’s take a look at the types of credit before diving into problems that might hurt you when taking credit.
Types of Credit
Generally, there are three types of credit, which are bank credit, trade credit, and consumer credit. Let’s take a look at the brief explanations below.
Bank Credit, refers to a loan provided by financial institutions, such as banks to individuals or corporate borrowers, in regard to their financial condition. Once the credit is agreed upon and provided, the borrower needs to do monthly repayment at a certain period of time.
Trade Credit can be defined as a type of credit where a customer can buy goods, but make the payment later in installments monthly, usually 30, 60, or 90-day repayment period.
Consumer credit refers to a payment method that allows individuals to do procurement without immediate payment. This type of credit applies to credit cards, where banks as credit providers pay first for the purchase, and the borrowers must pay back their debt with interest at a certain time.
Inconveniences that might Happen
However, whereas credit gives ease to the borrowers to purchase goods, there are crimes and risks that might await. People who take credit should monitor their credit regularly to avoid unwanted incidents.
To be aware of any potential troubles, here are four common unwanted incidents that need to be paid attention to and take a look at the infographic to know the elaboration.
Financial Infidelity
Identity Theft
Credit Report Errors
Progress Report
Conclusion
It is important to know any possible risks when you are taking credit. Being aware and always monitoring your credit regularly can help you avoid any unwanted problems like those mentioned above.
If you are interested in taking credit, you may also want to study some important terms that might be confusing here Commonly Confused Credit Terms.
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