What is the credit?
Many Mexicans wonder what credit is and what is the difference with the loan. In this article we will answer your questions. If you need money for a problem that arose unexpectedly, to pay for a medical expense or to repair the car then you may need to know a little more about the credits.
Basically a credit is a financial method by which an entity or person lends money to another so that the latter can solve their liquidity problem. Of course, this operation also has the so-called “interest” which is a percentage of the total borrowed and which must be disbursed by the person receiving the loan (mostly it is added to the installments).
The lender trusts the borrower since the latter promises to pay the money and interest in a timely manner (according to what has been stipulated in advance).
For example, if a loan is obtained to buy a vehicle, the money of the financial company is being used to pay for the value of the car. Therefore, the client must comply with the payment of monthly payments.
There are different types of credits that we can highlight:
1.Credits to buy in installments: It is used to acquire real estate such as homes or cars. In installment loans the client must sign a contract in which he agrees to reimburse a certain amount of money each month during a pre-established period.
2. Rotating credits: In this case it gives us the option to pay the total of a debt or to make minimum payments per month. A clear example of revolving credit is credit cards (whether granted by banks or department stores). At the same time they allow financing purchases with a monthly interest rate and of course the additional charges generated by the use and possession of a card. As the customer pays the fees the available limit increases and it is possible to make new purchases.
3. Accounts open to 30 days: In this case the credits are offered in the form of, for example, entertainment or travel cards. They must be paid if or when the month ends and in its entirety. It would be like an advance of credit with expiration in 30 days.
What is the insured and unsecured credit?
Another way to differentiate the credits is through your insurance:
1. Secured credit: something of value must be provided as collateral or guarantee that guarantees the payment of the debt. If the payments are delayed the lender has the right to take possession of the object of value that guarantees the debt. One of the classic types of secured credit are mortgages (to buy a house) where the bank keeps the title to the property until the client finishes paying his debt. If the loan is not paid on time, the financial institution can keep the house. The same happens with car loans.
2. Unsecured credit: Unlike the previous one in this case, the lender does not ask for collateral nor do they have to present valuable assets to guarantee the payment. An unsecured loan allows you to buy varied products on credit and, in return, only the promise of fulfilling obligations is offered. Therefore, as the creditor has no guarantees, it may require charging more interest. No one can keep the car, the house or whatever it was bought in the case of not paying. However, of course there are other legal ways to collect (such as a trial or wage garnishment).
What is the credit and its cost?
It is very important to know also what are the different costs that must be paid regardless of the type of credit requested. Basically the total value of the loan is divided into three “sections”:
1.Capital: is the amount of money requested.
2. Interest: the rate varies according to different aspects such as term, amount of cash, etc. It is presented as an annual percentage.
3. Associated costs: These are all additional payments that the client must pay related to the management and approval of the credit. For example, opening an account in a bank, paying a lawyer, paying the fees of a notary public, paying administrative expenses, stamps, etc.
Now that you know what is the credit the next step is to enter our site to perform a simulation according to the amount you need and when you can return it. Too easy!