What is the credit?

Types of credit

There are two great types of credit. The personal or commercial mortgages and credits go united to one or several concrete articles like, for example, a new kitchen. The renewable credit, on the contrary, allows him to have an amount of money fixes that it can spend as it wishes in an ample range of establishments and commerce.

Amortization

Normally, the loans are amortized in regular terms throughout a period of decided time. The mortgages can be amortized in variable terms, although the majority of the personal credits stipulates fixed quotas by practically equal amounts. If you wish to carry out another important purchase once she has finished paying the credit, she will have to negotiate a new loan.

Renewable credit means that you always can have the amount of his line of credit that has not been used; and whenever it amortizes part of the pending amount, that part of the credit limit will return to be again to its disposition. Therefore, if you have a limit of credit of 1,000 Euros, it spends 300 Euros and it refunds 100 Euros, it will have left 800 Euros available.

Regardless of the type of credit that chooses, it eliminates the quotas of amortization in time, or will have to confront economic penalties.

Interests

In order to insure the risk with the loans and of making profitable their money, the organizations generally apply to interests on the loans and renewable credits. It must have presents/displays it at the time of calculating the quotas of amortization.

For example, if you take 100 Euros to loan must pay a type of annual interest of the ten percent, the total cost is of 110 Euros. It is what is called simple interest, and rarely it is applied to the loans.

The compound interest is more habitual. It means that the interests are received with a regular frequency. For example, if you must 100 Euros and a ten percent of annual compound interest is applied to him, to end of year it will have 110 Euros. The second year, the financial organization will apply the ten percent of that amount it will add and it to the pending amount, reason why you will have 121 Euros, and so on. The interest can be composed as of any period: a day, one week, a month, etc.

In the credits with fixed quotas, the interests calculate beforehand and they are added to the quotas. Frequently a penalty is applied if the client wishes to cancel the pending debt before the decided thing, reason why the financial organizations always obtain the benefits that calculated originally.

In the renewable credits, you can amortize what wants, little or much, at any time. He can avoid the payment of interests totally if he amortizes the total amount taken to loan in the date from victory of the first quota.