Credit allows you to purchase the things you need or want when you don’t have the money in the bank. You’re agreeing that you will pay the lender back according to the terms of the contract. You benefit because you’re able to use the cash to access the goods or services immediately.
There are two primary types of credit: revolving credit and installment credit. Each type has its own unique features.
With revolving credit, the lender gives you an upper limit, and you can spend as much or as little as you want as long as you stay within that limit. When it comes time to pay the monthly bill, you also have a bit of flexibility. You can pay the minimum amount due, the full balance, or anything in between. Credit cards are an example of revolving credit.
With an installment loan, the lender gives you all of the money you need upfront, and they create a payment schedule to ensure that you pay all of the money back within a certain time frame. A SkyCap Loan is an example of an installment loan.