Credit
Definition
Credit is an agreement where a borrower receives something of value now and agrees to repay the lender at some date in the future, generally with interest.
Analogy
Think of credit like a trusty friend who lends you their notes when you miss a class. You get to catch up on what you missed (the value), but you have to return those notes back (repayment) and maybe do them a favor as thanks (interest).
Related terms
Interest Rate: The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.
Debt: Money borrowed from lenders for various purposes. The borrowers are obligated to pay back the principal amount along with agreed-upon interest.
Credit Score: A numerical expression based on level analysis of person's credit files, representing the creditworthiness of that person. It impacts one's ability to borrow money.
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