Credit is a powerful tool that comes in several forms. It allows you to buy now with the promise of paying later. By understanding how each works, you'll learn to manage credit successfully and use it to your advantage.
Loans
Loans let you borrow money that must be repaid with interest. You can obtain a loan for a specific purpose, such as financing a new car, paying college tuition and buying or renovating a home. You can get a debt consolidation loan, which combines all current debts from various creditors into a single reduced-interest payment plan.
Loans are generally divided into two types
Installment loans
Installment loans are made for a fixed amount at the time of your application and approval. This type of loan is repaid in fixed monthly payments over a specific period of time. The interest charges are included in the payments. Personal loans and Salary Transfer loans are examples of installment loans.
Credit Cards
Credit cards are perhaps the most common type of personal credit. Unlike installment loans, credit cards allow repeated transactions up to a maximum credit limit, also known as your available credit limit. Each time you charge something, you are borrowing the money until you pay it back. If you decide to pay the minimum payment of the credit balance over time, the credit card company adds interest charges to your account. Each month, you will pay a calculated amount until the borrowed amount is repaid.
To know more about Citibank's credit offerings, visit www.citibank.ae