Define and Explain thoroughly what is CREDIT?

Credit is defined in a couple of ways. One is the amount of money you are
approved to borrow from a lending institution. With this approval comes an
agreement to repay the charges, any additional fees that can or will be
applied, and to abide by time restrictions.
Credit can also be classified as your borrowing reputation. It paints a picture
of your payment history and provides the lender with information regarding
the likelihood of your repayment, in other words, your risk factor.

Consumers can also use credit to purchase items that they require.
Many things are too expensive for most individuals to pay for all at
once, from vehicles to houses. Credit allows you to pay over time
while still having access to important products and services when you
need them.

 Describe the credit Economy

The pure credit economy is a monetary paradigm in which there is no
money (in the sense of non-interest bearing currency). The notion has
a wide range of applications, from pure analysis to evolutionary
prediction. The models' features range from central banks directing
output to sophisticated barter in competitive financial systems,
resulting in significantly diverse assumptions about credit limits
and interest, price, and production determination. The origins and
ramifications of the pure credit economy notion must be examined in
light of this variation.

 Advantages of credit
Convenience. Using credit

The 5 C's of credit are character, capacity, collateral, capital,

and conditions.

 Character

Although it's called character, the first C more specifically refers

to credit history, which is a borrower's reputation or track record
for repaying debts.

2. Capacity

Capacity measures the borrower's ability to repay a loan by

comparing income against recurring debts and assessing the
borrower's debt-to-income (DTI) ratio.

3. Capital
Lenders also consider any capital the borrower puts toward a
potential investment. A large contribution by the borrower decreases
the chance of default. Borrowers who can put a down payment on a
home, for example, typically find it easier to receive a mortgage. 

4. Collateral

Collateral can help a borrower secure loans. It gives the lender

the assurance that if the borrower defaults on the loan, the lender
can get something back by repossessing the collateral. The
collateral is often the object one is borrowing the money for: Auto
loans, for instance, are secured by cars, and mortgages are secured
by homes.

5. Conditions

In addition to examining income, lenders look at the length of time

an applicant has been employed at their current job and future job
stability.

The conditions of the loan, such as the interest rate and amount
of principal, influence the lender's desire to finance the
borrower. Conditions can refer to how a borrower intends to use the
money.

There are many advantages to using a credit card. Some of the

benefits include:

Convenience. Using a credit card lets you buy

something today but put off the real cost until payday
rolls around – so you don’t have to wait

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Spread out the costs. If you need to make a big purchase, a

credit card lets you pay over several monthly instalments. This
can help with budgeting and it won’t leave a huge hole in
your finances

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Boost your credit. If you use a credit card responsibly,

lenders will notice – and it can help to improve
your credit score. If you have a low credit rating, you can
get a credit builder credit card designed to help you build
up your score

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Purchase protection. Sometimes there could be a problem with

your purchase – it might get lost or damaged, for
example, or the company could even go bust. With credit
cards, you have buyer protection for any purchases made
on the card between £100 and £30,000. It means you can claim
your money back from the card provider if there’s an issue
with your goods or services

Go interest free. Plenty of credit cards offer a 0% interest

period. That means you can borrow for free - with no interest
charged, so long as you make your minimum monthly repayments

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Cashback and rewards. Many credit card providers offer a

range of rewards to customers. You could be getting air
miles or similar shopper loyalty points each time you use
your card, or even cashback on purchases

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Slim down your debts. If you’re already paying

off debts you could use a balance transfer credit card to
reduce your interest payments, helping you to clear your debt
quicker

Getting trapped in debt. If you can’t pay back what you

borrow, your debts can pile up quickly. If you have bad credit,
you could get hit with high interest rates – and once you’re
in spiralling debt, it can be difficult to pay it all off

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 Damaging your credit. Your credit score can go down as well as
up. Miss a payment on your card or allow debt to stack
up and this can damage your credit rating. This can make it
harder to get credit in the future

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Extra fees. The interest rate isn’t the only number you need
to look out for when choosing a credit card – there
may be extra charges too. Your provider could impose fees if
you miss a payment or go over your credit limit, which is bad
news if you’re already in the red. Some credit cards might
have a monthly or annual fee, and many balance transfer cards
charge a fee to switch a balance. Check
the APR (annual percentage rate) to get an idea of the
overall cost of a card 

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Limited use. Credit card providers might charge you extra for

things that are free with a debit card, such
as withdrawing cash from an ATM or buying things overseas

A credit card is a thin rectangular piece of plastic or metal issued by

a bank or financial services company, that allows cardholders to
borrow funds with which to pay for goods and services with
merchants that accept cards for payment. Credit cards impose the
condition that cardholders pay back the borrowed money, plus any
applicable interest, as well as any additional agreed-upon charges,
either in full by the billing date or over time.