Course: What is credit?
3 minute read
Types of credit
There are three main types of credit:
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Credit cards
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Credit cards are the most popular form of credit and the typical way you begin establishing yourself as a borrower.
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Business lines of credit
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A business line of credit allows you to borrow up to a set limit and then pay interest only on the amount withdrawn. This can be a great option when your business needs help with cash flow.
You might draw on a line of credit as needed to cover payroll, buy inventory or repay funds.
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Term loans
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A term loan is a lump sum of money borrowed from a lender and then paid back on a fixed schedule. Term loans may have fixed or floating interest rates.
You’ll usually consider a term loan when purchasing equipment, renovating space or adding new real estate.