Consumer credit involves the use of credit for personal or business needs. It is a debt that an individual gets when purchasing goods or services. It can be the best partner for a business owner and can also be used for personal finances. Like a loan repayment calculator, you should also use a credit card repayment calculator when planning for this. Consumer credit comes in two basic categories: the open-end credit and closed-end credit.
Open-end credit. Also known as revolving credit. Though it is not required to pay the full amount due every month, it can be used repeatedly for purchasing transactions that involve monthly payback. While the most known form of revolving credit is credit cards, the home equity loans and home equity lines of credit (HELOC) are also in this category.
Credit cards are a type of payment cards that are used by people to purchase daily needs such as food, transportation, clothing, and other daily necessities. Unlike a charge card, credit cards allow consumers to have a continuing balance of debt, which is charged through interests. Interests are charged when the monthly balance is not fully paid.
The interest rates depend on the consumer’s credit score and payment history. The usual credit card interests range from 15-30 per cent or more. You can get lower interest rates from nonprofit debt management programs even when your credit score is below 500.
Closed-end credit. This is used to help individuals finance their certain needs for a specific period of time. This credit is also called instalment loans as the consumers are required to follow regular payment schedules until the debt is paid off. This is usually monthly and the interest charges are also included. Car loans, mortgages, and appliance loans are examples of closed-end credit.
With these, you’ll be able to understand how consumer credit works. Whether you need to use open-end or closed-end credit for buying a new home or vehicle, you need to use a loan repayment calculator or credit card repayment calculator to get what you need.