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Credits and loans

At some point in life everyone will encounter credits and loans. Whether it's by using a credit card, opting to pay something in installments or applying for a a larger housing loan. We've gathered the basics.

Everything you need to know about credits and loans

1. What is credit?

To purchase something on credit means that you are borrowing money at the time of purchase, which you will have to pay back later. Credit can be defined as an agreement between a lender and a borrower. Because it's a service it usually comes at a price, called interest.

2. What is interest?

The fee charged by the lender for loaning you money is called interest, taken as a percentage of the amount borrowed. On larger loans, the interest is calculated from case to case, depending on the probability of the lender getting their money back.

Services such as “pay later” is technically credit and you as a consumer should always be aware of the interest rates and additional fees.

3. Annual percentage rate (APR)

The annual percentage rate is the total cost of the loan calculated into a yearly percentage. The APR makes it easier to compare different offers from various lenders, as it combines all the fees and interest.

4. What is a credit card?

A credit card lets you purchase items and services which you will have to pay for at a later time.

5. What is a debit card?

A debit card is used to access money directly from your account. They can also be used for cash withdrawals from ATMs. Debit cards are also called payment cards or bank cards, and the most common card providers are Mastercard and Visa.

Hot peach colored P.F.C. debit card

6. What is an unsecured loan?

When the lender offers a loan with no assets as collateral, the loan is considered unsecured. Unsecured loans usually come with higher interest rates than housing loans and car loans where the bank has some security, and are always individually granted based on the borrowers creditworthiness. Read more about un-secured loans >

7. Am I creditworthy?

Your ability to pay back a loan is called creditworthiness. There are several factors taken into account when the lender decides if you are granted a loan or not, based on your income and previous debt. The credit check serves as an assurance that the bank will get their money back and most importantly, that your economy can handle a loan. Read more about how to improve your credit score >