Credit is a general term, covering a range of different loan and credit types, each with its own set of rules and characteristics. At National Debt Advisors (NDA) we give you some insight into the different types of credit of which you might already have accessed. Knowing what type of credit you have, you are able to understand what kinds of risks are involved should you neglect to stick to your repayments.
Secured credit is that which has assets connected as collateral. This means that the assets can be repossessed in the case of non-payment, to cover the costs of the debt.
This type of debt relies on your word, which promises repayment without putting anything on the line as collateral. Credit providers accept your word in good faith in the hope that you will repay the debt as agreed.
These are called signature loans. These loans often have higher interest rates due to the fact that you are not offering an asset as collateral.
When approved, this type of credit asks that you pay in a monthly minimum towards your outstanding balance.
Repayment is monthly. The minimum must be paid each month.
Usually credit cards fall into this category. A fixed amount of credit is allocated and can be used however you may wish.
A fixed amount of credit is allocated for a specific purpose. For instance, a car or home loan. A specified amount must be paid back each month.
The credit comes with a high credit limit, however, the full amount of credit that is used must be paid back in full when the bill is received.