CREDIT AND LOAN

Credit and loan are the means whereby the consumers and entrepreneurs borrow money in order to return the money or pay for purchases or expenses.

A loan is an installment by which a lender borrows money that must be paid back with an interest over a period of time.

Credit is the trust that allows a party to provide resources to another party thereby generating debt.

The following are the common examples of credit and loan

1. Mortgage
2. Credit cards
3. Home equity
4. Auto loan

Mortgage

This is a financial institution that enables a borrower to purchase something.

Credit cards

This is a payment card that allows the user to borrow money against a credit line.

Home equity

This is a market value of a house owner’s interest in their property.

Auto loan

This is a loan an individual take away in order to buy a vehicle. An auto loan is structured as installment loans.

Types of mortgage/loan

1. Repayment Mortgage
2. Interest-only mortgage
3. Fixed-rate mortgage
4. Standard variable rate mortgage
5. Discounted rate mortgage
6. Tracker mortgage
7. Capped rate mortgage
8. Cashback mortgage

Repayment Mortgage/Loan

This is a loan that is being paid back every month with an interest. At the end of the mortgage term, you will pay off the loan.

Companies that offer this type of mortgage/loan

1. Aetna
2. Common Bond
3. Estée Lauder
4. Fidelity Investments
5. First Republic Bank
6. Hulu
7. Penguin Random House
8. PricewaterhouseCoopers
9. SoFi

Interest-only mortgage

In this type of loan, one will not pay off any mortgage. It is just the interest that has to be paid off.

Companies that offer this type of loan

1. New American Funding
2. Guaranteed Rate
3. Navy Federal
4. Wintrust Mortgage
5. HomeBridge

Fixed-rate mortgage

With a fixed-rate mortgage, your lender guarantees your interest rate for a particular period of time.

Companies that offer this type of Mortgage

1. Quicken Loans
2. Citibank
3. Reali Loans
4. Chase
5. Rocket Mortgage
6. Guaranteed Rate

Discounted rate mortgage

a discount is given over a set of time, so the amount you pay can change if the lender changes their standard rate.

Tracker mortgage

This is the type of mortgage that you will pay a different amount to your lender.

Capped rate mortgage

These are mortgages that are variable, but with a cap on how high the interest rate can rise.

Cashback mortgage

This is the type of mortgage that your lender pays you a sum of cash which is the percentage of your loan.

Standard variable rate mortgage

In these types of loans, each lender is free to set their standard variable rate and adjust it to how they want it.

The difference between loan and credit

A loan is a sum of money repaid over a fixed term while credit is a revolving account which the borrowers redraw from available banks.

Loans are installments that are paid back over a period of time while credit is money that is paid into one’s account without paying back.

Importance of credit

1. It allows people to grow effectively
2. It makes companies have access to tools they need to produce
3. Credit makes consumers buy things they are In need of
4. The credit helps people to pay over time while accessing important products

Importance of loan

1 cash flow

2 Growth

3 Flexibility

4 Interest rates

Cash Flow

For an individual to start up a business, he/she needs capital

Growth

As businessmen or women, he/she need to grow in their business by making sure that their business is well equipped

Flexibility

Loans are flexible depending on the amount of money demanded

Interest rates

Some interest rates of banks are lower in the sense that low-class earners can afford to secure