What is Credit?
A sum of money lent by a bank or financial institution that is repaid with interest over time.
Credit is a loan provided by a lender, such as a bank, which the borrower agrees to repay with interest according to a set schedule. Common types include personal loans, auto loans, and mortgages.
The total cost of the loan is determined by the interest rate, loan term, and any associated fees. Monthly payments are calculated through amortization, which allocates part of each payment to interest and part to reducing the principal balance.
ExampleA 36-month personal loan for $15,000 would require you to make fixed monthly payments covering both principal and interest until the debt is repaid.