Crédito. Tipos de crédito.
Understanding Credit: Key Concepts and Types
What is Credit?
- Credit is defined as the ability to obtain products and services now while paying for them in the future.
- The cost of using credit is represented by interest, which is the fee paid for borrowing money from others.
How Interest Works
- Formal credit entities charge borrowers a higher interest rate than what they pay depositors, allowing them to profit from the difference.
- In addition to interest, there are other costs associated with obtaining credit.
Types of Credit
Personal or Consumer Credit
- This type of credit typically involves short-term financing, often used for purchases like clothing or travel.
Secured Loans (Crédito Prendario)
- Characterized by medium-term financing, this type of credit is commonly used for purchasing vehicles, where the vehicle serves as collateral.
Mortgage Loans (Crédito Hipotecario)
- Mortgages are long-term loans used for buying, renovating, or expanding properties; the property itself acts as collateral.
Factors Influencing Loan Approval
- Loan Term: Longer terms result in higher total repayment amounts due to accumulated interest over time.
- Interest Rates: Vary between institutions; some may offer lower rates based on their policies and risk assessments.
- Risk Assessment: Financial entities evaluate several factors before granting loans:
- Character: Past payment behavior and existing delinquency reports are analyzed to assess reliability.
- Capacity: The applicant's demonstrable income and current debt levels are considered to determine repayment ability.