Different kinds of credit
Consumers can be confused by all the terms given to the different types of credit available, such as:
Bankcard-Limits: generally between $300 and $3,000. A minimum payment per month is usually equal to 1/36th of the total amount outstanding. May charge annual fee as well as interest. Example: Visa, MasterCard.
Installment Loan: Usually a set number of equal monthly payments, which can include both principal and interest. Can be for specific items, like cars of home appliances, and secured by the item. If you default, the item can be repossessed by the seller. Also for personal loans based on your income. May require repayment of one to three months' interest or more.
Mortgage: Usually for home or other real estate. Might be a second or third mortgage on the same property. Also for home improvement. Guaranteed by the property, which cannot be disposed of until the mortgage is repaid. If you default, the property returns to the creditor.
Non-installment loan: Includes open-ended credit cards, single payment loans due in 30/60/90 days, service credit, debts to doctors, hospitals, utilities, and other services.
Open-ended credit: Charge up to your limit every month and pay the balance off every 30 days. Usually no interest if paid on time. Example: department stores.
Revolving credit: Overall limit is lower and you usually have a set amount to pay each month.
Secured credit: A specific asset pledged. If you default, you must forfeit the asset (i.e., mortgage).
Travel and entertainment cards: Usually fairly high limit, but companies monitor spending habits. Due in 30 days. No partial payments on regular cards, except in extraordinary circumstances where you might be allowed to negotiate a temporary partial payment. Example: American Express, Carte Blanche, Diners Club.
Unsecured Credit: Credit on which you have pledged ongoing income, but no assets.