Different types of credit contracts
Do you think that credit and credit-related debt problems are reserved for the less well-to-do? Do you think that credit is available only to those who have the means to borrow?
Not at all! In fact, the higher the personal or family income, the greater the use of credit and the more debt.
Consumer credit has become a social phenomenon and the problems it causes involve everyone, be their budget big or small.
Before going any further, the following are the definitions of certain terms that are frequently used in the credit context.
Contract involving credit
The most common contract involving credit is an instalment sale. In this type of contract, the merchant reserves ownership of the goods sold to a consumer until the consumer has paid a portion or all of the price of the goods. Generally, the full price must be paid before ownership is transferred, even if the consumer takes possession of the goods at the time of purchase.
Contract extending variable credit
A contract extending variable credit is a contract by which credit is extended in advance. The most common types are credit cards, credit accounts or credit lines. For this type of contract, the amount and term of the loan are variable.
Loan contract
This is the type of contact you sign when you borrow from a moneylender for a fee. This contract involves no ties of ownership between the lender and the good or service you purchase using the loan.