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Q. What exactly is credit?
A. Credit allows you to buy and use goods and services now, and pay for them later. For example, credit lets you use a car or a washing machine before (and, usually, long after) you have fully paid for its services. You pay for the services as you use them. 0f course, you could save now to buy the car in the future, but you may want or need the car now, not three years from now. Similarly, you may buy a pair of shoes or a dinner on your credit card now and pay for them later.
Q. What are the basic forms of consumer credit?
A. There are three basic forms of consumer credit: noninstallment credit (sometimes called thirty-day or charge-account credit), installment credit or closed-end credit, which is legally defined as credit that is scheduled to be repaid on four or more installments (usually monthly) and revolving or open-end credit. In addition, some lease arrangements operate like consumer credit and may be subject to similar laws, so these are discussed briefly in this chapter. However, credit secured by real property--your home, for example--is discussed in the chapters on "Home Ownership" and "Buying and Selling a Home.”