Well, here's the nuts and bolts of it:
Buy your toys, tools and what-have-yous today,
Pay for them sometime that's not today.
Of course, you will have to pay it back.
Unless, you know, you pay it off all at once...within your grace period. More about that later...
Typically, any of the following 4 things fly the flag of "credit":
Lines of Credit.
And, wait for it... credit cards.
So what's the difference?
Well, generally loans come with a fixed amount, repayment time and interest rate.
So you might use it for one of these guys here.
Knock knock. Who's there?
Yep, mortgages are specific loans for buying property.
They're what we call "secured".
That means if you don't pay, the bank could take it away.
Pretty simple, that one.
Next is Line of Credit.
A line of credit is sort of a hybrid between a loan and a credit card.
So if a loan were a zebra and a credit card were a donkey, a line of credit would be a... zonkey?
On one hand, it's like a loan because the bank tells you how much they are willing to lend you.
And you start paying interest right away on any money you to borrow.
On the other hand, it's like a credit card because you decide when you want to borrow from it.
And after you pay some off, that amount becomes available for you borrow again.
People often use a line of credit for larger purchases than you'd want to put on a credit card,
But smaller than you'd take out a loan for.
Like a home renovation or to attend your cousin's wedding in Hawaii, hmmm?
Enter the finale of our little floating parade... the credit card.
These can be issued by a bank or credit card provider.
Just keep this mind:
Each card you get will have a credit limit on it, so don't go over it.
Unlike our old friends the loan and line of credit, though,
Credit cards often come with a grace period.
In Canada that hovers in somewhere about 21-25 days or so.
And if you pay the full balance within the grace period,
You won't get charged interest.
Well, that's that for the 4 main types of credit.
OK, Larry...cue the sunset.