Credit is something that people in 2011 take almost for granted. That is unless you don’t have any left or you have “maxed out” your credit cards. Yet it was not long ago that our parents and grandparents did not live with such largesse. There was not such a sense of immediacy – to have it now or that “I must have it now”. It seemed that not only did previous generations not have access to easy credit – that the morals and the way that you lived your life ,and fulfilled your family’s needs was that you paid cash , and if you did not have the cash or could not afford it that you just did not buy the item or items. It’s certainly a sea change from current mores and practices. Yet what is credit what are the basic definitions and basics of credit and being offered credit on term,
It seems that the word “credit” itself can be defined in more than one way and manner; one simple definition might be that “Credit is the exchange of goods and services in return for the promise to pay in the coming future”. Two elements therefore are intrinsic to the word and phrase “credit”. The first of these is “futurity”. Although the decision to grant credit may be (and usually is) based partly on past history of the potential debtor, the credit itself also embodies the future since the payment is in the future (as opposed to the present tense). Payment is yet to come or arrive.
The other basic concept and series of concepts of dealing with credit and the issuing of credit terms is the element of “risk”. True the risk may be exceedingly small, or alternatively it may be inherently very great. Yet regardless of the value of risk in any transaction, risk always exists to some degree – it never is zero. That is a fact and truism of life. Nothing is 100 %, never can it be said that the issuance of credit is of zero percent risk – even if all parties and their history / personal and business history of records and transactions fully known and elaborated.
True and no doubt the degree of risk is also directly relative to both the amount of money or capital involved as well as the time spread between the transaction or transactions themselves and the coming due date for payment or full repayment in kind.
Lastly in terms of basic definitions and an essential understanding of credit and what the term “credit”: and “credit terms” involve that as both the amount and size of the credit expended or allocated tends to increase so does , in real terms , the actual degree of risk and risks themselves.
You may be loaning money to a good friend, you may be a banker or commercial loans officer or you may an auto dealership or automobile finance operation extending a time payment plan for the purchase of a car, truck or SUV. It can be best said that each and every decision whether or not to extend credit or money directly loaned to a friend or family member fundamentally involves the acceptability to the seller ( that is the person , business or persons extending credit and credit terms )of the degree of risk itself.
Lindsay B. Bart
Western Auto Credit provides Edmonton & Fort Mc Murray northern Alberta auto buyers with transportation
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